Increasing the state pension age is “not enough” to tackle the growing UK pension crisis, the Centre for the Study of Financial Innovation (CSFI) has reported.

Rather than just raising the state pension age, the government should support and “active ageing” environment to improve health and economic activity among those aged over 50, a report titled The Dependency Trap: are we fit enough to face the future?, sponsored by Schroders and written by Cass Business School professor Les Mayhew has suggested.

While the planned increases in the SPA to 66 this year, 67 by 2028 and 68 by 2037-39 will work to lessen the dependency ratio of working age people to pensioners, more needs to be done, CSFI has said.

“A focus on improving economic activity in the lengthening run-up to retirement would raise lifetime earnings and saving levels, as well as providing the tax revenues needed to fund state benefits. For this to happen the report shows that there must be improvements in health and work capability,” the report notes.

As men earn around 80 per cent more than women during their lifetime, CSFI has said that greater pension and savings measures should be introduced for women. To further bridge the gender pension gap, the CSFI report recommends that working partners should be able to contribute to the pensions of non-working partners, with the recipient also benefiting from tax relief on these contributions.

In addition, it has also been suggested that new financial products, similar to annuities, could be introduced for those in the ‘sandwich years’, whereby women in particular experience an overlap between care responsibilities for children and older relatives.

To encourage savings further, the report has presented a bespoke calculator that can combine the income outcomes from a series of contributions, which would assist individuals to utilise information that will be presented on the pensions dashboard.

Cass Business School professor Mayhew said: “The government’s response has been to raise the SPA, first for women and for all as of this year. Yet it has also encouraged people to expect to spend up to a third of adult life in retirement. If you take into account the impact of disability on dependency, the SPA might need to rise even faster than currently proposed which would bury the one-third ideal.

“This would not be necessary under the ‘active ageing scenario’, which would raise the overall activity rate of the working-age population from 80% to 85%. Most importantly, the improvement could largely be achieved if just one in six of those aged over 50 who are now inactive were in work. This would not just benefit the individuals concerned but also improve the nation’s economic and fiscal outlook,” he added.

Schroders global head of DC and retirement Lesley-Ann Morgan said: “Longer working lives should also help people to increase their savings for retirement. Clearly, the private sector has a significant role in helping to meet these challenges and Schroders, as a manager of people’s long-term savings, will play its part in that.”

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