The Government has changed its mind again on planned changes to the age for taking the basic state pension.
Work and Pensions Secretary Iain Duncan Smith has said that the age could now be raised to 68, and sooner rather than later, in a newspaper interview this week. A more exact timing for the intended change was not given.
For the Government, a deferment of one year in the age for the basic state pension would add 1% to GDP, he claimed.
Mr. Duncan Smith also suggested that the age for taking the basic state pension could be indexed to change with increases in life expectancy, as already happens in Denmark.
For some time, the Government has been planning a more rapid increase in the age for taking the basic state pension, compared with the schedule of the previous Labour Government. Labour had envisaged taking the age for the basic state pension to 66 by the year 2024 and to 68 by 2046, reflecting new data on longevity which shows that we are now expected to live into our 80s.
A Government source was quoted in ‘The Times’ newspaper within the past month as saying that the state pension age would now rise by 1 year every 5 years, until the age for taking the basic state pension reached 70 around the year 2035. This would have meant that a person aged 45 today would have been the first person unable to draw their basic state pension until they reached 70. That proposal would now seem to have been superceded, given the words of Iain Duncan Smith.
The Government’s constantly changing thinking on the entire pensions area has left even the Revenue (HMRC) admitting that they have difficulty keeping up. Pensions experts have described the Government’s numerous proposals and counter-proposals over the past year as ‘tinkering’ around the edges of the pensions system.
In addition to the basic state pension, Government has suggested it may also review the role of the National Employment Savings Trust (NEST), to change the scope of the scheme. The NEST scheme was planned to provide a pensions income through company pensions schemes to all who did not actively opt out of the scheme. However, pensions minister Steve Webb has pointed to the huge administrative cost to employers of meeting the requirements of the NEST scheme, and suggested that utilising existing infrastructures to provide a more generous basic state pension could be a more reasonable option.
