Retirement age could rise six months every year

Government says it wants to see the average retirement age rise by six months every year. So when can you expect to retire?

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The average retirement age could rise by as much as six months every year, if the Department for Work and Pensions gets its way. At the moment, the average age of retirement is 64.7 for men and 63.1 for women, but the government wants to see that climbing - and fast. In practice this means that the government would ideally like a man turning 50 today to retire at the age of 80.

The DWP argues that people are increasingly living longer, and that the average retirement age ought to rise with longevity. Steve Webb, the Liberal Democrat pensions minister, made it clear in an interview with The Telegraph that this was merely putting a figure on what the government has been hoping for for some time: that as people live longer, they choose to work longer, so they don't end up costing the state so much money in retirement.

He said that getting average retirement ages to rise by six months every year was: "an ambitious target but I would think we wouldn't be a million miles away from it already. We have seen some pretty dramatic changes in the last few years, especially amongst women."

The idea of such a rapid rise in the average retirement age is shocking, but at the moment rises in predicted life expectancy are equally surprising. Averages are rising by around 2.5 years every decade. The number of people over the age of 65 will increase 51% over the next 20 years, and the number of over 85s will double by 2030. The government argues that people will need to work longer if we are to avoid a funding crisis for things like the NHS and social care.

The government is planning to encourage people to work longer - and of course the fact that the state pension age continues to rise (and is likely to hit 70 within the next 50 years) should act as a major incentive to stay in work. Webb said the government will also focus on measures to: "prevent individuals being forced out of the labour market early, and where we cannot, supporting older workers to re-enter the world of employment."

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Retirement Not An Old-Fashioned Idea


Reaction

Unsurprisingly the proposals have been enormously unpopular. In her column for the Yorkshire Post, pensions expert and campaigner Ros Altman points out that rises at this level would mean that over the next 30 years people are retiring at the age of 80. She said: "I'm not sure that's a realistic policy aim."

Nigel Green, founder and chief executive of deVere Group says that the idea of working later is simply not realistic for many, pointing out that: "These proposals will only really produce the desired outcome for the government if people are able to remain in and continue to be effective in their jobs. This is typically not the case for those individuals in the more manual or physically-demanding jobs."

"In addition, rightly or wrongly, many employers simply do not take on older workers. There is no evidence that this will change. It's harsh, but the chances of being taken back into employment if you lose your job are usually reduced once you reach your mid to late 50s and beyond."

What can you do?

There will be no compulsion for anyone to retire later than they had planned. They will only be at the mercy of changes in government policy if they have no pension provision on their own, and are therefore unable to retire until they hit state pension age.

For those relying entirely on the state, there's always the concern that if the government is unable to persuade people to retire later by encouragement alone, they may be tempted to increase the state pension age faster than anyone was expecting.

Green says this should be a "wake up call for everyone that retirement planning is increasingly a personal responsibility." he added: "These government plans are a reality check to get a robust, sound financial strategy in place sooner rather than later."

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