Commenting on changes to the state pension age announced in today’s Autumn Statement, Mike Smedley, Pensions Partner at KPMG, said:
“This is impressively long-term planning by government. They are looking at reductions in potential costs from the 2030’s onwards – this is not about short-term savings. For individuals the news will be unwelcome, although many already know that they cannot afford to retire as early as they would like. At least with a long period of notice, people can start to plan ahead. It does mean that the youngest people in work today may not retire until the age of 70 or even later.”
“One of the side effects of the change is for public sector workers. So teachers and nurses who are starting work today may need to wait until 70 for both their State benefits and their pension."
“The big prize is the potential boost to the economy if working careers are extended – adding to economic growth, investment, consumption and tax receipts. But this requires creation of new jobs and roles that can be filled by older employees. Raising the State Pension Age (SPA) is the stick to force people to work longer. In future, the Government may also need to provide a carrot to encourage greater employment in older age. If the rise in SPA simply means years of unemployment and low income at the end of someone’s career, the policy will have failed.”
Looking at the impact on employers and individuals, David Fairs, Pensions Partner at KPMG, said:
“Organisations will have to work out what their policy is around longer working life. For older employees they will need to think about accommodating an older workforce - from making it easier for a less physically able person to carry on working, to retraining those whose skills are becoming less current, to programmes to help those not able to work until State retirement age to leave the workforce before then."
“For the younger workforce, they will need to rethink their workforce proposition – the idea of working for 52 years is not likely to be attractive to those starting work. Providing the ability to have regular career breaks is likely to become much more important if employers are to engage and retain top talent.”
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.