Retire at 60… if you take cut in state pension

WORKERS could be allowed to retire at 60 if they accept a smaller state pension in retirement.

a review is considering plans to allow certain individuals to take their pensions early if they sacrifice around £35 a week from their payouts.

They would receive £120 a week instead of the £155 paid at the official retirement age, currently 65 for men and 63 for women.

The review also raises the prospect of blue collar workers in poor areas retiring earlier than office workers in wealthier parts of the country. People who labour in manual jobs from their teens might be able to retire in their mid-60s, while anyone who goes to university and starts work later could have to wait until they reach 70.

‘Penalising those in poor health’

To pay for the changes, the review says the Government could be forced to curb generous annual increases to the state pension for millions of retirees.

Currently, the state pension is guaranteed to rise by the higher of inflation, average earnings or 2.5 per cent every year to keep it in line with the cost of living.

a progress report on the review, which is half way through, suggests the so-called inflation ‘triple lock’ could become too expensive in future.

Sir John Cridland, the former CBI boss who is conducting the review, will unveil his final recommendations to the Government in March. He was commissioned by the Department for Work and Pensions to investigate ways to make sure that the state pension age is set at a fair level.

The state retirement age is due to rise to 66 for both men and women by 2020. It will reach 67 by 2028. To limit the costs of the payouts, which have soared due to Britain’s ageing population, the Government also proposes to review the state pension age every five years, adjusting it in line with life expectancy.

The result could be that workers currently in their 20s and 30s end up working into their 70s.

Experts fears that will leave millions struggling to find work in their 60s and without enough in savings to retire.

Former pensions minister Ros altmann said: ‘The current system is penalising those who are in poor health, possibly due to having had very long working lives in physically demanding jobs. Socially, such a system seems inequitable, and the groups with lowest life expectancy lose out significantly.’

Sir John was asked to find ways to ensure workers still receive a state pension for a third of their adult lives. He has examined extending a number of special exemptions for groups expected to be hardest hit. His interim report found those most at risk include low paid women, ethnic minority groups and the sick and disabled who have struggled to build up adequate savings throughout their lives.

one suggestion under consid- eration is allowing these workers to take their pensions early in exchange for a smaller sum. For instance, someone who took their pension seven years early might receive £120 a week rather than the full £155.65 a week. This could be adjusted depending on how early someone retired.

another option on the table is to allow those who have worked from a young age or in tough manual jobs to take their state pensions early if they have built up enough national Insurance contributions to qualify for the payout. This could also be applied to workers living in deprived areas where life expectancy is much lower. However, in return for help for the poorest hefty annual increases to state pension payouts could be ditched.

Sir John’s report also warned that workers with office jobs or university graduates could end up having to work longer. at present workers need to build up 35 years of nI contributions to qualify for the full state pension. The report suggested ‘increasing the number of years required for a full state pension so that savings could be reinvested in state pension age mitigation’.