Pension age rising as savings dwindle

A few weeks ago, reports from the Department for Work and Pensions (DWP) and the former Confederation of British Industry (CBI) chief John Cridland both claimed the state pension age must rise for it to remain affordable for the government. However, commentators are still debating who is responsible for making sure retirement 'works', with many saying that individuals and businesses are not adequately preparing themselves and must shoulder more of the responsibility.

Rising costs

Government ministers have recently come under increasing pressure to reduce the cost of pension provisions, which is rising due to longer life expectancy and the growing ratio of pensioners to workers.

To solve the problem, the DWP report suggests the state pension age should rise to 70 for workers under 30, while Cridland's paper suggests pushing the age to 68 for those under 45. The government is expected to make a decision by May.

Taking responsibility

The reports also raise bigger questions over who is responsible for ensuring workers can afford their retirement. Speaking to BBC Radio 4, Cridland argued that employer attitudes will need to change as the population continues to age. In particular, he said, employers would need policies to accommodate workers who are also caring for elderly parents and a more open attitude to hiring workers in their 50s and 60s.

Meanwhile Conservative MP Tom Tugendhat, writing in The Telegraph, states that as responsibility increasingly falls on the individual to save for retirement, private pension providers must cut their costs to make saving more affordable. According to his calculations, savers can pay up to 34% of their pension pot setting up and managing their fund.

Building savings

In order for this to matter, however, workers must first look at their savings plans. A recent House of Lords committee report shows that 40% of the working-age population currently has below £100 of savings.

Financial advisors recommend people hold at least two months' wages in savings, while also contributing to pensions and other investments like mortgages.

If you’re worried about debt and your ability to save, or you want to set up an affordable repayment plan, contact Dukes Bailiffs today.