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05

Pensions minister urged to increase private pension age to 60 in 2024

Open-access content Friday 15th May 2015 — updated 5.13pm, Wednesday 29th April 2020

Ros Altmann, the new pensions minister, has been urged to increase the private pension age to 60 in 2024, according to the Centre for Policy Studies (CPS).

The figure represents an increase of a year every two years starting in 2016. The current private pension age is 55, rising to 57 by 2028. 

Michael Johnson, a CPS research fellow, said: "Such a move would focus minds on longer working lives, commensurate with the significant rise in life expectancy over recent decades."

In a report entitled Some Suggestions for the New Pensions Minister, Johnson proposed 16 measures to boost savings, including monitoring the roll-out of auto-enrolment in workplace pensions, in particular SME opt-out rates. 

He felt a pension contribution rate of 8% (with effect from October 2018) would be insufficient and said the government should consider raising contributions.

In order to promote more saving, Johnson urged the government to encourage an increase in the nation's saving rate from 5.9% to around 13%. He also said pension pots should be aggregated into a single pot. 

Other recommendations outlined in the report include establishing a not-for-profit annuity auction house to automate the process of shopping around for annuity deals; simplification of the regulatory framework between the Financial Conduct Authority and the Pensions Regulator; and encouraging the National Employment Savings Trust and its competitors to develop a collective drawdown capability to enable retirees to pool their longevity risk.

Johnson said the government should simplify the tax framework by combining national insurance contributions and income tax into one earnings tax.

He said the triple lock indexation was "utterly unaffordable" and it should be replaced by rises in line with the consumers' price index in 2020. 

On pension tax relief, Johnson suggested it should be replaced with a "simple 50p per £1 saved", up to an annual allowance of £8,000, paid irrespective of taxpaying status. He recommended capping total combined annual ISA and pensions contributions at £30,000 per year and scrapping the lifetime allowance. 

Johnson also suggested combining the 101 disparate local government pension scheme funds into a single fund with four separate, competing, asset allocators, while "mapping a course" to pure defined contribution schemes for public service pensions. 

This article appeared in our May 2015 issue of The Actuary.
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