Government’s announcement of a phase out of the default retirement age should be a wake-up call for those who see a longer working life as the mainstay of their pension planning, according to Friends Provident.
In the June 2010 budget this week, the Chancellor George Osborne confirmed that government would press ahead with an acceleration of the phase-out of the Default Retirement Age (DRA), and look to raise the state pension age to 66.
This would mean that employees could not take the Basic State Pension until that age, requiring them to work at least one year longer, or fund that extra year from their own resources.
While Friends Provident’s Visions of Britain 2020 report indicates that 48% of workers plan or desire to work beyond the state retirement age, this should not lead employees to neglect their pension plans, as they must also consider that they may be physically unable to work, due to age or unexpected ill-health. This would therefore make pensions planning a crucial issue, if only as insurance against any obstacle to plans for a longer working life.
This issue will affect an ever-increasing social group, with the number of workers aged over 55 set to grow from 5.14m today to 7.16m in 10 years, according to Friends Provident.
“As a nation, we should start seeing retirement as a process in our lives and not a one-off event,” said Martin Palmer, head of pensions marketing at Friends Provident.
“The concern is that by abolishing the default retirement age we could be opening up a whole new can of worms. People need to be aware of the reality of working longer. We need to … encourage a bigger percentage of the working population to start making provision for later on in life.”
