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Britons should work until they are 70 and then be rewarded with a more generous state pension, Adair Turner has said.
The former chairman of the Pensions Commission said that reforms to raise the state pension age should be accelerated, with retirement benefits staggered from the age of 65 before the introduction of a larger universal pension from the age of 70 by 2030.
As head of the Pensions Commission, Lord Turner oversaw a wide-ranging review into the UK’s pension system.
“I would make the state pension more generous at 70 and, in addition, I would introduce forms of state pension or means-tested benefit, which would be available for lower-income people who’ve retired from 65 or 66 onwards.
“We have failed to think creatively,” he added.
Lord Turner was speaking to clients of Kleinwort Benson, the private bank, about the themes and ideas behind his new book, Between Debt and the Devil: Money, Credit, and Fixing Global Finance.
He said that under his pension proposals, everybody, including the wealthy, would be entitled to the state pension at 70, but those on lower incomes, or with manual jobs, would be able to draw benefits from 65.
“There are people on lower incomes, or have done manual jobs, who are worn out by the nature of those jobs or have been unemployed and don’t have jobs,” he said.
“I do not think we have been creative enough about creating two slices [between], 65 and 70 where the state pension is available on a means-tested basis and then at 70 by 2030 where it will be available for everybody on a non-means tested basis.”
Lord Turner said that he intended to meet John Cridland, the former director-general of the CBI, who has been charged by the UK government with reviewing the state pension age, in the near future to discuss his proposals. “I shall encourage him to think about some of those more creative combinations,” he added.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, the UK financial services group, broadly welcomed Lord Turner’s proposals.
But he added: “Adair’s Pensions Commission recommendations always hinged on reform of the state pension to eliminate means testing as being a fundamental foundation for then reforming the private pension system.
“If you reintroduce means testing, you run the risk of undermining private pension savings. There are complex moving parts at play here.”
The Department for Work and Pensions said that it had encouraged people to engage with Mr Cridland’s review ahead of the recommendations being published in 2017.