UK workers face higher state retirement age

UK workers face a higher state retirement age as they live longer but an idea attributed to Adair Turner, head of the government's Pensions Commission that university graduates retire five years later than others was "unworkable", a senior government adviser said yesterday.

"We cannot relentlessly go on increasing the time that people are paid in retirement," Mr Turner, told BBC Television.

But Chancellor of the Exchequer Gordon Brown said serious changes to the pension system would probably not be introduced before a general election is held in four or five years' time.

Mr Turner said a Sunday newspaper report had misunderstood him when it said he was advocating university graduates wait five years longer than non-graduates before drawing the basic state pension. He told the BBC the idea was "completely unworkable".

The Sunday Times had reported Mr Turner saying university graduates may have to wait until they are 70 years old before drawing a state pension.

However, Mr Turner said it was potentially unfair to raise the state pension age across the board from its current level of 65 when people from lower economic groups were dying sooner after retirement than the better-off.

"When we argue for an increase in the state pension age we have to understand the sensitivity that the people who are enjoying the least increases in life expectancy are the lowest economic groups," he said.

Britain's state and private sector retirement system has been hit by the combined effects of an ageing population, lower birth-rates, the 2000-2002 fall in stocks and low bond yields.

Hundreds of company pension plans that offer benefits linked to final salary levels have been shut to new staff, while many schemes have fallen into deficit, causing companies to pump in billions of pounds to keep them afloat.

Mr Turner's commission will report in the autumn but he has already suggested a range of options - allow the number of poor pensioners to grow, raise taxes, forcibly increase private saving, or raise the average retirement age.

Ministers have so far shied away from compulsory saving, which Mr Turner said in the interview might be necessary, and say major changes could be years away.

"These are decisions not just for this decade, they are for future decades," Mr Brown told BBC Television.

"The sort of changes that if they were recommended... that some people have talked about would require another period of consultation that may lead into the next Parliament," he said.