Prime Minister David Cameron wants to link retirement ages to increasing life expectancy to plug a pensions gap ‘apartheid’ between public and private sector workers.
Hitching retirement ages to longevity will balance the early retirement culture in the public sector with the harder pressed private sector, who are more likely to work until they are older.
Speaking at a summit in Stockholm, Sweden, Cameron told delegates he loved the idea of Norway’s ‘life expectancy based adjustment.’
The idea is Norwegians have a flexible retirement age up to 75 years old. They can choose the age they wish to stop working, and the longer they put off the date the more their pension is worth.
The UK has a similar system for deferring the payment of the state pension that rewards those that retire later with a boost to their income.
Over 55s can pick up an extra 10.4% pension income for each full year they defer state pension payments, or they can opt for a lump sum plus interest paid at 2% above the Bank of England’s base rate.
Cameron also told the delegates that public sector pension reform in the UK was essential despite strikes and other protests.
“We do have this problem with the public sector pensions system where you have got a lot of resistance to changing public sector pensions, some of which have very low retirement ages,” he said.
“We could end up with quite an apartheid system where people in the private sector have this flexible ethic, they go on working they change the way they work.
“But in the public sector, we have quite a cut off and a very expensive public sector pensions system.”
The Northern Future Forum summit was called to allow political leaders and policy experts to discuss how social problems are tackled in different countries.
In a separate speech to the Institute of Economic Affairs, in London, Lord Hutton, a leading government pensions adviser, said: “We are going to have to forget that [retiring at 65] as a way forward. We are going to have to work longer and pay more for it.’
“The state pension age is being increased to 67 for men and women between 2026 and 2028 – and it is expected to keep on rising.”