Government urged to introduce phased state pension

Aviva's research shows that 32%, the equivalent of 4.5 million, mid-life employees believe they may not have enough money to retire when they choose.

It says flexible withdrawals of the state pension from the age of entitlement would remove the “all or nothing” choice faced by millions of workers, allowing people to claim some of their state pension from their state pension age. The unclaimed amount would then increase in line with traditionally deferred state pensions.

The age at which people can access their state pension is rising. Together with a shift towards defined contribution schemes, it means almost half (49%) of UK employees aged 45+ are considering working for longer or are already working beyond the state pension age.

A more flexible approach to withdrawals of the state pension not only benefits individuals but also businesses, by allowing firms to capitalise on the talent and experience of these employees for longer. Aviva’s research reveals that 72% of employers are experiencing challenges in recruiting workers.

As a result of increased flexibility, Aviva says there will be a greater need for guidance and advice.

Lindsey Rix, CEO of savings and retirement at Aviva, commented: “There are several actions the government and employers could consider to better support workers in the 45+ age group. We believe the choice between claiming 0% or 100% of the state pension no longer reflects our increasingly flexible working lives and we are calling on the government to allow individuals to make flexible withdrawals from their state pension when they reach their state pension age.

“As a leading provider, we are also committed to helping deliver better help and support for customers. We want to work with the government and regulators to make sure that suitable advice is accessible and affordable for the majority, within a properly regulated framework.

“The number of mid-life employees continues to grow to unprecedented levels. Aviva has learnt a huge amount about the challenges and opportunities facing this population from the delivery of our Mid-Life MOT programme. Our report shows there is a huge demand for a fuller working life amongst those aged 45+. However, we believe the state pension age acts as an artificial ‘hard line’ in the working lives of many. If we fail to prepare for an ageing workforce, the consequences will be damaging for generations to come. Not only could we see an increase in poverty in retirement; but also, a greater strain on our working population and a UK restricted from investing in its future as it struggles to navigate its present.”