Graduates may have to wait years longer for a state pension

GRADUATES could be forced to wait years longer than blue collar workers to collect their state pension under controversial plans being considered by the Government.

Ministers are contemplating a ‘twotier’ system, under which workers could only receive their state pension after around 45 years in work.

It means anyone going to university would face working until they are almost 70. Meanwhile those who leave school at 18 could be eligible to start drawing their state pension at 63.

Last night critics said the system would be another ‘financial blow’ for young people who are already facing crippling levels of student debt.

The proposal is one of a number of options designed to address unfairness in the state pension system – set to be floated on Thursday in a Governmentbacked report by former CBI boss Sir John Cridland.

He has been asked by the Government to devise ways to ensure workers receive a pension for a third of their adult lives, and will publish his final recommendations in March next year.

Ministers say current plans to increase the state pension age to 68 would further penalise manual workers and those living in poorer parts of the country, who have a lower life expectancy.

But critics said a two-tier system would be galling for English graduates – who will be saddled with average debts of £44,000, according to a report published earlier this year.

Laith Khalaf, of pensions and savings giant Hargreaves Lansdown, said: ‘This would be another financial blow to young people going to university who already face huge student debts. In terms of address- ing differences in life expectancy across the country, this also seems like a pretty blunt tool.’

Work and Pensions Secretary Damian Green is said to support plans to pay a full state pension of £155.65 a week to anyone who has made around 45 years of national insurance contributions. This could mean anyone who left school at 18 would be eligible to draw their state pension at 63. Those who went to university would have to wait three or four years more.

Stay-at-home parents, carers and those who had periods of unemployment or suffered from longterm illness would have their enti- tlements protected. Over the past few years the state pension age for women has been gradually increased from 60 to fall in line with the men’s pension age of 65 in November 2018. They will then rise in tandem to 66 in 2026, 67 in 2028 and 68 in 2046. A ‘flat rate’ pension was also introduced in April, whereby anybody who accumulates 35 years of national insurance contributions qualifies for a full state pension.

But there are fears this system penalises residents of areas such as Glasgow, where baby boys can expect to live to 72.6 years – a decade less than those in east Dorset.

One advocate of a two-tier system is former pensions minister Baroness Ros Altmann. She has also suggested a minimum age could be introduced so that those who left school at 16 could not receive a full state pension at 61.

‘If you are looking to control the cost of the state pension and make it fairer, it’s not right to keep increasing the state pensions age,’ she said.

‘There are lots of people in tough manual jobs and in certain areas of the country who will not collect a penny of state pension having contributed for a full working life.’

Last night a Department for Work and Pensions spokesman said: ‘ We have asked Sir John Cridland to conduct an independent review and we look forward to receiving his interim report in due course.’

‘Financial blow to young people’