Retirement age should be raised to 70, says CBI

The retirement age should be raised to 70 if the government is to avoid a pensions crisis, the Confederation of British Industry (CBI) has said.

In its report on developing sustainable pensions provision, the CBI set out its vision to bring about better employer schemes, a higher state pension and an increased retirement age.

According to the CBI, the state pension age should gradually rise to 70 over the decade from 2020 to 2030. Together with a rise in the basic state pension this would mean the percentage of GDP being spent on state pensions would rise from 5% in 2000/01 to 7.1% by 2050/51 – rather than to 6% under the existing system.

To help low paid workers, the CBI report recommended that the government should increase the basic state pension to the level of the Pensions Credit in order to reduce the need for means testing. A government-provided, earnings-related second state pension should also be retained, the confederation said.

The CBI has warned that unless public sector schemes are made more affordable it will lead to growing resentment among private sector workers and employers who are paying the taxes that finance them.

Prepared by the CBI's Pensions Strategy Group, which is made up of senior business leaders and led by Unilever UK Chairman Richard Greenhalgh, the report concluded with a 22-point action plan aimed at companies, individuals and the government.

Richard Greenhalgh said that there were "no easy solutions" but the CBI's report was a "serious attempt to assess how we avoid widespread pensioner poverty in the decades ahead".

"Overwhelmingly, employers remain committed to pensions and have responded as well as they are able to, given the difficult circumstances that have confronted them. Few people appreciate the extreme pressure companies have been under - businesses will have to make £6 billion worth of additional pension payments in each of the next three years," he said.

"Employers are not the villains of the piece. Private provision has been tested to the limit by falling returns on investments, tax regime changes and longer life expectancy. This has been hugely damaging to companies' ability to invest and that's bad for shareholders, employees and the UK economy as a whole."

(gmcg)