Change state pensions to allow workers to retire later, says Aviva

STATE pensions should be more flexible to help the millions of people who cannot afford to retire when they want, the biggest workplace pension provider has said.

In a report published today, Aviva warned that almost five million workers over the age of 45 will not be able to retire when they would like to.

It called on the Government to reform the state pension, the largest source of income for the average pensioner, to help people who are not ready to give up work.

In 2015, the pension freedom reforms gave savers more flexible access to their private pensions. The proposed reforms would increase flexibility for the state pension.

Last night, two former pension ministers told The Daily Telegraph that the proposals would make an already complex system even more convoluted. But Aviva said it would boost flexibility for retirees and allow employers to keep hold of experienced staff.

Lindsey Rix, of Aviva, said the number of older workers has grown to “unprecedented levels”.

She added: “We believe the state pension age acts as an artificial ‘hard line’ in the working lives of many. If we fail to prepare for an ageing workforce, the consequences will be damaging for generations to come.”

The average age of the UK population has grown from 34 to 41 in the past 40 years, and there are now a record 10 million workers aged over 50.

Meanwhile, the number of pensioners in debt has grown at a faster rate than any other age group, according to Salisbury House Wealth, the financial advisers.

Currently, when workers reach state pension age they can opt to take their pension in full or to defer it, which increases future payouts.

Under Aviva’s proposals, savers could take half of their state pension and leave half untouched. They would receive the same increases as if they had deferred the entire payment.

Baroness Altmann, who was pensions minister under David Cameron, said reforming the state pension age would be more beneficial.

Aviva said the proposals would have to be partnered with policies to increase the number of people who take financial advice before they retire.

A spokesman for the Department for Work and Pensions said: “An independent review concluded that a universal State Pension age is the best system, providing simplicity and clarity to enable people to plan for retirement.”