Two big pieces of news this week may shape the future of pensions for public and private sector workers forever. Late last week we had the European Court of Justice banning risk assessment based on your gender, declaring that it is a breach of EU rules on equality.
Then yesterday the long awaited Hutton report was released recommending that public sector workers should invest more, work longer and earn less for pensions.
So what does this all mean?
First of all the EU ruling is a massive blow for males who need to buy an annuity (which is forced on most of them) to retire. Women statistically live longer than men so subsequently the cost of their annuities has always been higher or returned less depending on how you look at it.
The companies that provide annuities will no longer be able to assess the cost based on gender and this will mean increased costs for men. What makes matters worse is that currently 8 out of 10 people who buy annuities are men. This ruling will not apply until 21 December 2012 but insurance companies are expected to alter prices accordingly sooner rather than later.
The Hutton Report, released yesterday, makes a series of recommendations on how to tackle the spiraling costs of the public sector pension. Over the last few decades it was generally the private sector pensions that took a hammering but now the government has turned their focus to the public sector.
The reasons for this are numerous and you can learn more by turning to the information on our pension crisis page, but the simple fact is that the current public sector final salary pension is unsustainable. Lord Hutton suggests that the retirement age for most public sector workers should rise from 60 to 65, and beyond, that the final salary pensions be abolished and that public sector workers should contribute a lot more. It’s yet to be seen how much of the report the government will action but what is clear is that the final salary pension perk for public sector workers may well become an endangered species
Anyone who has in the past tried to deny there is a pension crisis should give up after this week and stop burying their head in the sand. Whether you agree with the events of the last week or not this may well be the final nail in the pension coffin.
At Rescue my Pension we believe there is another way, so don’t accept terms dealt to you by someone else – take control of your financial future by contacting us.