Pension: Expert discusses state pension tax
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The OECD claim that the retirement age should increase by two years to coincide with the rise in life expectancy. According to the organisation, the adjustment should be made by global governments when life expectancy rises by three years.
They claim that the change should come to split the benefit between work and retirement.
Also within their report on ageing populations, the OECD said that raising the state pension age could also boost the economy enough to raise living standards by 3 percent over the coming decades.
According to The Telegraph, this change would also trim government debt burdens by the equivalent of 1.5 percentage points of GDP.
Over the last few decades, Britain has already begun increasing the state pension age, and the Government has announced further increases over the coming decade.
The age from which you can take retirement is gradually increasing for men and women, and there are plans to move the state pension age from 65 years to 68 by the late 2040s.
However, the organisation which covers its 38 member countries, most of which are wealthy said: “average effective retirement ages are not projected to keep up with projected gains in life expectancy anywhere in the OECD.”
According to the Office for National Statistics, we could see a rise in the life expectancy of men – an increase of almost three years over the next 25 years is expected.
As a result of this, and following the OECD’s claims – the state pension age should rise another two years.
According to the organisation’s research, typically a one-year rise in the pension age delays the average retirement by five months.
This is because individuals would use their private pensions or savings to leave work before full government support kicks in.
OECD has warned that changes need to be made to prevent the rising costs of healthcare, pensions and debt servicing that will amount to 8 percent of GDP for the average country.
Their analysts suggested changes such as encouraging older generations to keep working and increasing the female participation rate as a preventative measure.
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According to the Telegraph, the UK is in a better position than most countries.
The expected fiscal pressures on the UK would amount to around 5 percent of GDP, or £100 billion based on today’s annual GDP.
The OECD said that funding this could be done via taxes, debt, or reforms to boost growth and keep a lid on costs, the OECD said.
It comes after the Department for Work and Pensions rejected calls in the summer to return the state pension age to 60 for men and women.
The call came to match the figure from as recently as 2010 where women received their state pension at 60.
In response to the demand, the Government said it would be “neither affordable nor fair” to taxpayers and future generations.
Due to the increase in state pension ages, it is estimated that the rise will have saved £215 billion between 2010 and 2026.
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