Pension age hike to hit private sector

Increase in pension age will also hit private sector workers

Public service workers are not the only group to be hit by recent changes to pension policy. In his autumn statement, the chancellor announced that increases to state pension age would be brought forward. While this has a direct impact on the negotiations over public service pensions it will also have a huge effect on private sector workers as it will delay the age they can afford to retire.

Previously, the government had announced that state pension age would reach 66 for men and women from October 2020. SPA will now increase from 66 to 67 between April 2026 and April 2028.

This means that workers born after April 1961 will have an SPA of 67; while those born between April 1960 and April 1961 will have an SPA of between 66 and 67.
Officially, SPA is not due to increase to 68 until 2046 (a phased increase from 67 for people born after April 1977) but it now seems likely that this increase will also be brought forward. Almost certainly, it brings closer the day that an SPA higher than 68 is introduced.

Late November also saw an announcement from the pensions minister that the government is delaying the requirement for private sector employers to contribute to employees' pensions for the first time.

Employers with fewer than 50 staff will now have the requirement delayed for over a year, from 2014 to 2015. Employers with up to 3,000 staff will see a delay of several months. There will also be a delay in phasing employer contributions to their full level under the legislation.

Prospect pensions officer Neil Walsh said: "It is unfortunate that the political consensus on the need for employers to make pension contributions on behalf of employees has been undermined. Far from reducing burdens on employers, the extra uncertainty will create more difficulties implementing the new regime."

Meanwhile, a consultation by European regulatory authorities has raised further concerns about the future of private sector defined benefit provision in the UK.
Walsh said: "An unthinking extension of insurance rules known as Solvency II to occupational schemes could result in employers being asked to boost scheme reserves by hundreds of millions of pounds. Instead of improving security for members, this could simply drive employers away from this form of pension provision."