IoM propose state pension age of 74

Pensions experts are already warning that, if adopted, it could lead to a rapidly increasing state pension age in the UK.

In a review of the IoM's social security and National Insurance schemes, it proposes linking the state pension age to longevity so that retirement makes up 30% of someone's working life.

This would lead to a state pension age of 74 for anyone born after 2011.

The paper said this option will “ensure fairness in terms of the financial strain placed on the working age population to support pensioners”.

Other key recommendations include:

- introducing a flat rate single-tier pension system from 2016, with £180 being the maximum rate payable;

- extending the contributions required to qualify for a full state pension to 45 years;

- upping the state pension in line with growth of Isle of Man average earnings; and

- workers continuing to pay National Insurance contributions past state pension age.

The paper said that if all seven of the reforms are implemented, the NI fund will be sustained through to 2072.

Tom McPhail, head of pensions research at Hargreaves Lansdown said:

“We’re not quite in such radical territory yet, here in the United Kingdom and there are important differences between The IOM and the UK.

“In terms of demographics and the support ratio of workers to retired population, the challenge in the IOM is more severe than in the rest of the UK.

“Nevertheless there are also some close parallels and the scale of radical reform called for by this review in the IOM points to the kind of shift in state pension provision that we should expect over here in the longer term.”