Retirement age must rise or next generation will pay

Opposing a higher State Pension Age would mean asking our children and grandchildren to foot the bill for the equivalent of a 4p rise in the Basic Rate of income tax to cover the extra costs of an ageing population, Secretary of State for Work and Pensions John Hutton said today.

In a speech to the ABI, Mr Hutton set out the case for raising the State Pension Age ahead of a pensions bill next week that will call on MPs to set a course for the next forty years of a gradual rise from 65 to 68.

Mr Hutton said: "Possibly the most significant part of next week's Bill is to legislate for gradually raising the State Pension Age to 68 by 2046.

It is a big step to ask one parliament to set a course for forty years. But it is the right thing to do as we need to lock in stability in pension's policy to allow future generations to plan ahead with confidence. We need to be straight with people on this crucial issue so they know where they stand and can plan accordingly.

"As unpopular as it may be to talk about working longer - the simple fact is that if we aren't prepared to increase the state pension age, we will simply pass an ever greater and frankly unsustainable burden onto our children and grandchildren.

"Those who would oppose the increase in the State Pension Age must do so in the full knowledge of the predicted consequences. That they are in effect arguing for more than a 4p rise in the Basic Rate of income tax to pay for a population spending more and more of their lives in retirement."

Mr Hutton also reassured industry that personal accounts would be designed to complement not detract from existing pension provision and said the government is looking very carefully at this issue ahead of the White Paper - due to be published next month.
Mr Hutton said: "The White Paper will set out our views on the best way forward. But it is clear that: firstly - private sector expertise will be crucial to the success of personal accounts - which is one reason why the proposed delivery authority is so important. We envisage that personal accounts will be delivered by the private sector.

"Secondly, that we should strive to incorporate a proper opportunity for savers to exercise choice over the management of their fund and that this would be one of the principal responsibilities of the delivery authority.

"And thirdly, we must guard against 'mission creep'. The system of personal accounts needs to be focussed on its target market. They will be designed in order to fill a gap in the existing market, not substitute for it.

"Protecting existing provision isn't just about the safeguards put in place to ring-fence personal accounts. Supporting good quality existing employer provision is also about reducing the regulatory burden and making the existing system simpler for employers and providers."