MILLIONS of people will be forced to work longer before they can collect their pension the government said yesterday as it first equalised the state pension age to 65 from 2018 and then raised it to 66 from 2020.
The government said around 5.1m people would be affected by the changes but said £30bn would be saved between 2015 and 2020 through a reduction in spending on state pensions and pensioner benefits.
It said a further £13bn would be saved through increased income tax receipts and national insurance contributions.
The increase to the state pension age was four years earlier than proposed under the Labour government but four years later than had been originally proposed by the coalition.
The government also accepted the initial findings of Lord Hutton’s report on public
sector pensions published earlier this month, which called for government workers to make greater contributions to their own retirement.
It said it would implement an increase in employee contributions equivalent to three per cent from April 2012, which it said would save £1.8bn a year by 2014.
The government also confirmed it intended to implement the previous government’s proposals for a national pension savings scheme, now called the National Employment Savings Trust (NEST).
Steve Beet, public sector pensions partner at PricewaterhouseCoopers, said with people living longer, even with the introduction of more flexible retirement arrangements, the state pension age needed to rise.
But Beet warned: “In the context of a public sector pay freeze, higher employee pension contributions, as early as 2012 could place an extra burden on take home pay.”