Employees would be able to withdraw savings earlier but suffer a £35 a week pay cut if proposals were implemented
Employees could be allowed to retire on a state pension at the age of 60 under one proposal outlined in an interim government-commissioned report into the state pension age released this week.
Independent reviewer John Cridland, former director-general of the CBI, said the suggestion, which would rely on the retiree taking a reduced weekly payout, was one of several put forward to him to boost incomes for various groups nearing retirement age.
One example given in the report suggests a 60-year-old could claim their state pension at £120 a week rather than £155.65 a week. Apart from the normal annual uprating, this amount would not be increased.
Other ideas for reforming the state pension age included providing early access to the state pension after a specified working life. For instance, a person who starts work at 16 could become entitled to their pension at 66 rather than at state pension age, which could be 69 by 2050. A consultation has begun on the report and will run until 31 December 2016.
Cridland said: “The future of the state pension age is a hugely important issue for this country. It must be fair and sustainable, and reflect changes in society. My interim report provides an insight into my developing thinking and poses a number of questions.
“Whatever recommendations I decide to make in my final report, they will be underpinned by the importance of effective communications about the state pension age. People need to be able to plan effectively for their own retirement.
“I want to encourage as many people as possible to respond to the consultation and really hope to stimulate wider discussion.”
Tom McPhail, head of retirement policy at investment services firm Hargreaves Lansdown, urged employers to contribute to the consultation. “The state pension is going to change, and it will impact the choices people make about the end of their working lives,” he said.
“Many people drop out of the workforce in their 50s for caring or health reasons. How can employers redefine working responsibilities and give people flexibility to help them stay in work up to and perhaps past state retirement age?”
McPhail suggested older workers could transfer their skills and experience by training and mentoring younger people. “Keeping staff in their jobs longer could help employers run their businesses more efficiently by increasing overall staff productivity,” he said.
Cridland’s interim report noted that expenditure on the state pension could rise from its current level of under 6 per cent of the UK’s gross domestic product (GDP) to more than 7 per cent of GDP by the 2040s.
The report also examined the existing government policy of boosting state pension payments by a minimum of 2.5 per cent each year, and by more if necessary to stay in line with price or earning inflation.
“Withdrawing the triple lock has been identified by some people as a way of mitigating the impact of state pension age changes,” it said.