Retirement at 65 'to be scrapped'

Many workers are not saving enough to retire at 65

Compulsory retirement at 65 is to be scrapped because of the growing pensions crisis, according to newspaper reports.

Andrew Smith, the Minister of Work and Pensions, told the Observer he wanted to see a more "flexible" retirement age.

He said about 50% of UK workers were simply not saving enough for the number of years they could now expect to be retired.

"As we all want a decent standard of living in retirement then it follows that we either have to save more or work longer or some mixture of both."

The government is publishing a Green Paper on pensions next week.

More and more people would like to move gradually into retirement

Andrew Smith

A less rigid retirement age is expected to be included in its proposals.

This could mean allowing people to draw a pension but continue to work part-time for the same firm, for example.

Mr Smith told The Observer: "We've got to get away from the idea of retirement as a cliff-edge, where on Friday you're a valued member of the workforce, but on Monday you're shuffled off to retirement and that's it.

"More and more people would like to move gradually into retirement."

Not radical

Mr Smith is not expected to announce a radical reform to the state pension structure, such as getting rid of the state second pension or raising the basic state retirement age.

We either have to save more or work longer or some mixture of both

Andrew Smith

He is also not expected to make it compulsory for either individuals or employers to contribute to a pension, describing private pensions as a "voluntary partnership" between the state, individuals and employers.

This would come as a relief to the Confederation of Business and Industry (CBI) which has warned that compulsory pension contributions could cost UK businesses £29 billion each year and lead to job cuts.

UK PENSIONS IN CRISIS

Key pension facts and figures at a glance

In pictures

But it would disappoint trade unions who were in favour of such a scheme.

The Green Paper is also expected to propose measures to reduce the red tape and regulation faced by companies offering occupational schemes.

High expectations

The formation of a new pensions watchdog with the aim of restoring trust in the pensions industry is also expected to be proposed.

If the Green Paper gets just high marks for presentation and low marks for action, it will have failed

ABI

The Green Paper is likely to disappoint various groups which had been hoping for a more radical response to the UK's pensions crisis.

Mary Francis, director general of the Association of British Insurers, said: "The government has the chance to improve the pensions landscape and make a real difference.

"But if the Green Paper gets just high marks for presentation and low marks for action, it will have failed. It is vital that the government gets this right."