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U.K. May Lift Retirement Age to 70, Ease Pension Cost

Bloomberg

July 2, 2003

UK - The U.K. may increase the retirement age for workers by five years as part of the government's plans to ease the burden of funding pensions.

Industry Secretary Patricia Hewitt said she's considering raising the mandatory retirement age to 70 from 65 and making it illegal for companies to force workers to retire any earlier. Hewitt said her proposals, published at parliament in London, are aimed at stopping discrimination against older workers.

``It will provide more choice and flexibility for those who wish to stay in work,'' Hewitt said in a statement.

U.K. ministers are under pressure to reassure voters their retirement funding is safe amid growing concerns over companies' ability to meet their pension obligations. Pension plans at most companies including Royal Dutch/Shell and BAE Systems Plc are in deficit as tumbling stock markets reduced the value of investments.

Eighty-three of the companies in the benchmark FTSE 100 Index had a combined net deficit of about 45 billion pounds ($75 billion), based on earnings statements and annual reports.

People also are living longer after they stop working, increasing the cost of pensions.

A British man on average is expected to live until he's 74.6 years, according to government data compiled in 1997, compared with 70.9 years in 1981. The mandatory retirement age of 65 for men has remained unchanged since 1948.

Conveying Reality

Still, making people work longer isn't popular. A MORI Research Ltd. poll for Eden Brown, a U.K. recruitment company, showed that 6 percent of men and 1 percent of women expect to work until the age of 70.

``There is still a large gap between expectations and the reality in terms of both pensions and retirement age,'' said Ian Wolter, managing director of Eden Brown. ``The government will have their work cut out to convey the new realities to employees.''

Hewitt's plans also drew criticism from opposition parties.

``The government must not use this initiative as a means of resolving the pension problem through the back door by compelling people to postpone their age of pension,'' said Vince Cable, a lawmaker from the opposition Liberal Democrats.

The government said it will gather evidence from industry groups and other interested parties before publishing plans for legislation in the fall. Any new laws would come into force by 2006, the department said in its statement.