The government has been urged to increase its efforts to raise awareness on the cost of retirement and to get older people to stay in work, after a report from the House of Lords' Economic Affairs Committee branded increases to the state pension age a "red herring". 

The report argued that the UK is "strikingly unprepared for an ageing society", with forecasting from the Office for Budget Responsibility suggesting that "on current policy settings" the fiscal challenges posed by an ageing society would push borrowing above 20 per cent and debt above 270 per cent of GDP by the early 2070s.

However, the Economic Affairs Committee argued that raising the state pension age, which governments of all hues have tried, is not a solution to the UK's ageing population, as many people in their 50s and 60s leave the workforce much earlier. 

The committee said that it was concerned that increases in the state pension age are unlikely to promote a return to work among the ‘pre-retirement’ cohort and may increase financial hardship within elements of this group.

Given this, it argued that government policy should instead prioritise encouraging and supporting those aged 50+ to remain in work until retirement as their chances of re-entering the labour market once they have left are "troublingly low".

As part of this, it also encouraged the government to look at tax and other incentives—including eliminating any cliff edges in public service pensions. 

More widely, the committee also warned that there is "widespread ignorance" of how much it costs to retire, urging the government to consider an education campaign on this issue and find out if the UK’s financial services sector is suitably organised to provide for the population as it ages.

In particular, the committee said that the government should consider a campaign to educate younger people on this issue, and it should also consider whether our financial industry is suitably organised to provide for the population as it ages. 

Wider changes may also be needed, given life expectancy changes, as the committee acknowledged that it is difficult to see how people will have enough retirement provision in the future under existing arrangements, given the already existing shortfall between resources and expected lifespan.

Given this is a problem that is set to worsen as life expectancy increases, the committee called on the government to set out its projections for pensioner poverty under a range of
scenarios of increasing life expectancy.

It also encouraged the government to set out those policies it considers sufficient to address any associated increases in pensioner poverty.

House of Lords Economic Affairs Committee chair, Lord Wood of Anfield, said: “People are having fewer children and living longer and successive governments have simply not focused on the seismic effects a rapidly ageing population will have on our economy and society. 
 
“Raising the state pension age, which saves the government money, but increases pensioner poverty as many people have already stopped working by their sixties, is a red herring. Getting more people in their fifties and sixties to stay in or return to work is key. 
 
“To successfully confront this challenge the approach to financial management of today’s and tomorrow’s young people will need to change. They will need, from a much earlier stage in their lives, to plan and prepare to work longer and save more. 
 
“The lack of a published strategy or forum for discussion on this topic demonstrates that this serious, but long-term, issue is not be taken seriously enough. The government needs to begin addressing the impact of ageing now so that all age groups can live better and longer lives.”

Standard Life’s Centre for the Future of Retirement welcomed the report, with director, Catherine Foot, urging the government to provide a formal response to the inquiry as soon as possible, setting out a clear, strategic and cross-departmental plan of action.

She stated: "Longer lives are an extraordinary success story, but our policies and institutions have not yet caught up.

"Action is needed throughout the life course, but particularly during the transition between work and retirement, over the ages of 55 to 70, where people’s circumstances vary enormously when it comes to their ability to work, save and care for their families.

"Longer lives transform the shape of families, with four or even five generations alive at once, raising complex questions about intergenerational support, wealth transfer and how working-age adults balance employment with caring responsibilities.

"Unless we act now, we risk worsening pension poverty in years to come.”

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