CBI calls for retirement at 70


The Confederation of British Industry (CBI) has waded into Britain's pensions debate with a call to increase the state pension and raise Britain’s retirement age to 70.

The employers organisation's Pensions Strategy Group has proposed raising the basic state pension to the level of the current Pension Credit to reduce the need for means-testing low-paid workers.

This would amount to a 50 per cent rise in the pension which would be paid for by gradually increasing the retirement age to 70 between 2020 and 2030.

The CBI said that the scheme would cost more than £10bn a year, or 3p on the standard rate of income tax. It would also mean around 7.1 per cent of GDP being spent on pensions by 2050/2051, compared with 6 per cent now.

Its report also warned that the current level of public sector pensions cannot be sustained. Unless public sector schemes are made more affordable, it said, it will lead to growing resentment among private sector workers and employers who are paying the taxes that finance them.

The CBI urged firms and staff to contribute more to company schemes and proposed that new employees should automatically be opted into company schemes.

But it rejected calls from the TUC to make it compulsory for both companies and individuals to pay into a pension scheme, arguing that compulsion could lead to some firms reducing their contributions to the legal minimum while costing business up to £22bn a year.

Instead, the report suggests that the government increases incentives for companies and staff to pay into pensions schemes by introducing a range of tax credits worth up to £3.5bn.

The government should also reduce regulatory and cost burdens on schemes rather than adding to them.

Other initiatives proposed in the CBI's 22-point action plan include the government paying for free financial advice for people in small companies, and the introduction of a Partnership Pension into which the government would match the contributions being made by employers and staff for a limited period of time to encourage saving.

Richard Greenhalgh, the chairman of Unilever, who heads the Pensions Strategy Group, said: "There are no easy solutions but this report is a serious attempt to assess how we avoid widespread pensioner poverty in the decades ahead."

But he defended the behaviour of employers – many of whom have closed final salary pension schemes to save money – painting them as victims of falling equity returns, tax regime changes and increasing life expectancy.

"Overwhelmingly employers remain committed to pensions and have responded as well as they are able to, given the difficult circumstances that have confronted them," he said. "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.

"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."

"The UK's voluntary approach must be reinvigorated," Greenhalgh continued, "and we are confident it can be. That means employers, government and individuals recommitting to pensions and each accepting their responsibilities."

TUC general secretary Brendan Barber welcomed the CBI's recognition of the depth of the pensions crisis and said that their intervention would only add to the pressure on the government and the Pensions Commission to adopt radical proposals to plug the savings gap.

"To that extent we welcome this report, but many of its policy prescriptions are wide of the mark," Barber said.

"Employees in particular will be angry that their employers are suggesting they should work until they are 70 before they get a state pension, especially as the CBI is lobbying for 65 as the age at which employers can force people to retire."