United Kingdom

'Disadvantaged groups' would not benefit from state pension freedoms, experts warn

November 2016

 

So-called state pension freedoms, where early access to state pension may be granted to certain groups of people, may not benefit its target audience, industry experts have warned.

Following the release of a government-commissioned report into the state pension age by John Cridland, director general of the Confederation of British Industry (CBI), many have spoken out about its policy suggestions which were intended to provide a flexible approach to retirement, in line with private pension freedom provision.

In particular, the preliminary report suggested earlier pension access for those who started work young, earlier access to a reduced state pension or early access for those with a lower life expectancy based on occupation and where they live.

But Steve Webb, Royal London Policy Director and former Pensions Minister warned that early access would not benefit disadvantaged groups.

"Paradoxically, the people who build up lots of qualifying years tend to be healthy men. This is because the most reliable way to build up a full contribution history is to be fit and healthy and in paid work for a long period of time," he said. "Although there are lots of credits for people who aren't working, there are lots of gaps in the credits 'safety net'."

Steven Cameron, Aegon UK pensions director added that enabling early state pension access at a reduced level would create a 'budgetary timing issue' for the government as more state pensions would be paid out sooner.

David Parfett, Senior Corporate Pensions Consultant said: "It's extremely timely that a consultation is being launched now to consider ways of introducing flexibility to the state pension system to allow greater choice and cater for changing working patterns and ever increasing life expectancy. However, any changes should fairly cater for all socio-economic groups whilst of course being sustainable."

He added: "Any changes to the state pension system should allow for sensible lead times to enable suitable planning whilst ensuring any alterations are simple to understand."

 

 

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