Today’s younger generation will have to work until
they are 68 for just £3 a week extra from the State
under “landmark” pensions changes announced on
25 May 2006.
Under the proposed changes, some experts said
could cost the equivalent of 4p on income tax, the
State retirement age will rise to 66 in 2024, 67 in
2034 and 68 in 2044.
That means that anyone currently aged between 38
and 46 will have to work an extra year, and those
currently aged between 29 and 37 an extra two
years. Hardest hit will be those now aged 27 or
younger who will have to work for three more years.
The weekly pensions allowance is to rise in value
over the next 50 years to £139 for average earners,
compared with £100 without the proposed changes.
However average earners will no longer qualify for
the pension credit, cutting their income from the
State by £36 and leaving them only £3 a week better
off – or £1 a week for each year they work beyond
65.
The increase in the retirement age is to help to pay
for bigger State pensions, which will be linked to
earnings instead of prices. That will start from 2012,
as long as it is “affordable”, although Gordon Brown
has by no means accepted that it is inevitable that
the change will happen then.
The means-tested credit will be reduced so that only
a third of pensioners will qualify by 2050, compared
with 45 per cent at present.
Anyone who works for a company that does not offer
an occupational pension will automatically join a new
personal savings scheme. They will contribute 4 per
cent of their salary, with the company adding a
further 3 per cent and the Government 1 per cent.
That scheme will generate a private pension of about
£80 a week for average earners by 2050.
John Hutton, the Work and Pensions Secretary, told
MPs that the scheme was designed to make people
provide for their old age. “Today’s White Paper seeks
to entrench a new pensions savings culture where
future generations can take increasing personal
responsibility for building their retirement savings,” he
told MPs.
Women who give up years of work to look after
children will be entitled to the basic State pension for
the first time, although housewives with no family fail
to qualify.
Women who leave work to raise children, and carers
who look after elderly relatives, will both find it easier
to qualify for full pensions. Everyone who retires
after 2010 will be able to get a full second pension
by showing that they made national insurance
contributions for 30 years rather than 39 as at
present.
