Page last updated at 18:06 GMT, Thursday, 2 July 2009 19:06 UK

Pension view 'not radical enough'


Lord Turner: "Raise state pension age to 70"

The author of an influential report into the future of pensions now believes that his proposals were not radical enough.

Lord Turner told the BBC he would now argue that the age at which people received a state pension should be raised more quickly.

He also suggested public sector workers should move to more flexible pensions, rather than a final salary scheme.

His commission's proposals four years ago moulded government pensions policy.

Pension age

The age at which people start to receive the state pension is getting later in the coming decades, close to the recommendations made by Lord Turner's Pensions Commission.

People can still retire at a younger age, but will not be paid a state pension until they reached the "pension age".

We have to make it [the public sector pension] sustainable and we have to make it fair
Lord Turner

The state pension age for men and women will rise to 66 in 2024, to 67 in 2034 and 68 in 2044. Each rise will be phased-in over two years.

Lord Turner told the BBC that there were arguments made during his review that the pension age go up to 70 by as early as 2030.

"If I was redoing my report I would be more radical, arguing for an even faster increase in the state pension age," he said.

A number of other recommendations from the commission became pension policy and law.

They included the view that increases in the state pension age should be linked to rising life expectancy, that the state pension be linked to average wages and not prices, and the introduction of a "personal accounts" for those without access to company schemes.

Recession factor

The economic downturn has brought the health of company and public sector pension schemes into sharp focus.

With deficits mounting, a number of household name companies have closed their final salary schemes, not only to new members but also to existing members.

This has led to questions regarding the more generous pensions on offer to public sector staff, guaranteed by the taxpayer.

However, unions and staff argue that workers were paid less than jobs in the private sector and so a decent pension was part of their employment package.

However, Lord Turner told the BBC that his view was that these staff might now have to face up to having schemes that based retirement income on an average of their career salary, not their final salary.

"We have to make it sustainable and we have to make it fair. I think it should move to average salary from final salary," he said.

He also suggested that the age at which they started receiving this pension should be more flexible over time.

"It is not taking people's retirement away from them," he said.

"I think this idea that a 25-year-old sits there worrying whether their retirement is 65 or 67 is complete rubbish."

Life expectancy was key to making pensions fair to different generations.

It was impossible to say how long people would live for because we were unaware of whether there would be any major breakthroughs in medical science, he said.

Government response

A spokesman for the Department for Work and Pensions said: "Our pension reforms will radically and fundamentally change the pensions landscape in the future."

She said that, under the Personal Accounts scheme, 11 million workers would be given the chance to save in a pension with a contribution from their employer for the first time.

"Our bold changes to the state pension system respond to the demographic changes in society. They will ensure the state pension system is sustainable and affordable for the future," she said.

"We have also taken steps to reform public sector pensions to ensure they are affordable into the future. These include ensuring new entrants to the civil service enjoy a pension based on a career average and a retirement age of 65."

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