U.K. Eyes Upping Retire Age To 69

Britain must relieve strain on its pension system by raising the retirement age to as high as 69 by 2050 while increasing payments to a population that is living longer and having fewer children to support it, a government-commissioned report said Wednesday.

"There are significant problems in our pensions system," said Lord Turner, the head of the commission that produced the report. "There is a major demographic challenge,"

Increased life expectancy means Britain will see a big rise in the number of retirees in the next 35 years, many of whom face relative poverty if the pension system remains unchanged. The commission said a balance must be struck between keeping pension costs down while allowing Britons to retire at a reasonable age.

With more retirees, declining savings rates and fewer workers and children, other European countries and the United States face similar problems. The U.S. retirement age is gradually moving from 65.5 today to 67 for people born after 1960.

Even with a higher retirement age, British pension benefits will need to rise from 6.2 percent of GDP today to as much as 8 percent GDP in 45 years, the report said.

Britain's basic state pension — currently paid to women at 60 and men at 65 — is just over $138 a week. The commission did not propose a comparable per-person increase.

To reduce the burden on state coffers, the Pensions Commission report said the retirement age should move to somewhere between 67 and 69 for both sexes and proposed the establishment of a national savings plan to which employees would contribute a minimum 5 percent of their earnings. Tax relief would cover a fifth of that contribution.

Employers would have to provide a 3 percent matching contribution.

A mandatory plan would be deeply unpopular, and the government is unlikely to back it.

Work and Pensions Secretary John Hutton said the government welcomed the report as "the broad framework" for a national debate.

The government was "ruling nothing in and nothing out," he said. "The question is over how we act, not whether or when."

Despite its objections to a higher retirement age, Britain's largest labor organization welcomed the report as "bold and hard-headed."

"The clear majority of the conclusions are undoubtedly progressive," said Brendan Barber, the leader of the Trades Union Congress.

Amid the debate, retirees say they are struggling to make ends meet, and complain of feeling like a burden to society after decades of hard work.

A common complaint is that the state pension, which is linked to average prices rather than earnings, has not kept pace with inflation. And lucrative private pensions that had bolstered the state pension are being eroded by higher taxes, underperforming stocks and mismanagement.

"We've paid out all the time and now people say we don't deserve what we're getting," said Brenda Denby, a retired civil servant.

The report recommends linking the state pension to average earnings to help pensioners keep up with working people.

In 1955, a 65-year-old British man could expect to live to 77 and a woman to 81. But by 2055, the commission said last year, a 65-year-old man could expect to live to nearly 87 and a woman to 89.

And according to the commission nearly 10 million working-age Britons are not saving enough for their retirement.

The European Union's working-age population is estimated to drop from 303 million to 280 million by 2030, while the ratio of retirees to workers could almost double by 2050.

Italy has raised the age of retirement to obtain a full pension from 57 to 60. Belgian labor unions staged a nationwide strike last month against government plans to raise the earliest retirement age from 58 to 60. German lawmakers agreed this month that the retirement age should rise from 65 to 67 between 2012 and 2035.