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IoD Calls for Retirement at 70
By Louise Armitstead, The Times, London
United Kingdom
July 18, 2005
The Institute of Directors (IoD) will tell the government that the official retirement age must be raised to 70 to fund a rise in the basic state pension.
The business lobby group will issue the warning as part of its submission to the government-appointed Pensions Commission, chaired by Adair Turner, which is reviewing the UK private-pension system and long-term savings to assess its effectiveness and make recommendations for change.
But, although an official pensionable age has to be set for financial reasons, the IoD will also call for a flexible approach to retirement. Miles Templeman, IoD director-general, argues that if some workers wanted to continue beyond 70, it would have a significant impact on pension shortfalls and could even save up to 2% of Britain's gross domestic product.
"The retirement age should not be rigid," he said. "In Sweden, as the average rate of mortality rises, so does the pensionable age. This is more in line with the country's pension needs and reflects the fact that we are living longer."
Templeman said businesses must start thinking about how to accommodate older workers while employees' attitudes must also change.
"The notion that your last job is also your most senior role is wrong," he said.
"Employers must think of those jobs that are less demanding in terms of time and energy for workers as they approach retirement."
The IoD's recommendations will fan the debate surrounding the pension age and the Turner Commission. Last month the Trades Union Congress (TUC) joined forces with charities Which?, Help the Aged and Age Concern, to form the People's Pension Coalition that aims to keep the retirement age at 65 and increase compulsion in contributions.
Although Turner has said he is wary of any sudden rise to the retirement age, he is expected to recommend several policy changes to the government when he delivers his final report in the autumn.
"We have to stop the spread of means testing," he said. "It is a disincentive to save. It arises from the fact that almost uniquely we have a basic pension below our poverty line."
Meanwhile, quoted British companies with sizeable pension deficits, including British Airways, Rolls-Royce, BAE Systems and Invensys, are this week digesting proposals from the Pensions Protection Fund (PPF) that could greatly increase their personnel costs.
The PPF, a safety-net scheme for the pensioners of failed companies, which was set up by the government this year, has set out plans for a levy to fund its operations that would penalize companies with underfunded pension schemes.
The PPF estimates that the deficit among quoted British companies to fund its level of benefits is £134 billion.
Companies with deficits will bear a greater proportion of the cost than those with fully financed schemes. The PPF said last week it intended that 80% of the levy total should be collected from firms whose schemes were deemed to be "at risk" - either from underfunding or from the parent company's general financial state.
Companies have 12 weeks to comment on the proposals, which are slated for introduction in the 2006-7 financial year.
The PPF also warned in the consultation paper that the likely amount to be raised from the levy will exceed the £300m a year the government had first indicated.
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