There is no doubting that the pension system has been in need of change for a while. The current retirement age was set before the dramatic increase in life expectancy we have experienced. Medical advances mean retirement, which previously lasted only a few years, can now last nearer 20. Indeed, it is widely reported that the state system is overwhelmed but few people have made an effort to obtain alternative cover. As a result, the UK pension system is undergoing various reforms aimed at addressing these issues and building a retirement system suitable for the future.
Most recently, we have seen plans to increase the retirement age . Women are already being brought in line with men through an increase in retirement age to 65, after which both will be raised from 65 to 66, then to 67 and, ultimately to 68. Personal Accounts - to which employers, employees and the Government will all contribute – are being launched from 2012 to address the alternative provision issues. Pension benefits are once again linked to average earnings and a new approach to the second state pension system (SP2) ended ‘contracting out’ from 6 April 2012 .
Personal Accounts will probably be the most wide-ranging reform, and are scheduled to start towards the end of 2012. Employees will be enrolled automatically in the scheme (unless their employer runs an exempt alternative) and minimum contributions have been set. It is at least a start in the process of bringing our pension system up to date.
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