It may be my advancing age but pension changes seem to be of ever increasing interest to me. Two new ones came in the budget yesterday. The automatic linking of retirement age to life expectancy and the scrapping of the state second pension in favour of an increased basic pension. In recent years there has been a steady move away from those heady days of the 1980s when the mood was that everyone would soon be able retire in there 50s and enjoy a long, healthy and well paid retirement. Here are two further steps in the journey back to reality.
The scrapping of the state second pensions is to my mind a necessary step in the amalgamation of income tax and national insurance also announced as a long term goal. I expect qualification for basic pension will become a simple year count based on a minimum level of income tax payments rather than the current system of national insurance contributions, which no one outside of the national insurance office really understands. Inevitably there will be winners and losers as many people currently qualify for combined basic and second pension well in excess of the £140 per week proposed new amount.
As we are all living longer, the linking of retirement age to life expectancy sounds sensible. However, I have seen very little commentary on the capacity of older workers to continue to perform at work as they approach seventy. I have a lot of retired clients and whilst many of them have remained healthy and active into their seventies and beyond, many have not. I can see this becoming an HR nightmare. Employers who can no longer impose retirement on staff at age 65 (with effect from 2011/12) will have to walk a tight rope of employment law in order to remove an employee whos age starts to impair their performance. The lower paid will be less able to afford to retire before state pension kicks in and hence will be more likely cling on to their jobs as long as possible. The lower paid are also statistically more likely to take employers to tribunal for unfair dismissal. As the disincentive of damaging future employment prospects will no longer be an issue, I can see this becoming a very frequent problem for the employer.
The information in this article was correct at the date it was first published.
However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.
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