Consumers would trade state pension for retirement flexibility.

28 April 2014

UK citizens want much more flexibility over retirement and when they receive their state pension, according to new research from advisors, PwC

A PwC report says that consumers would prefer to choose when they retire and would be prepared to pay a penalty in the form of a reduced state pension if they retired before the state pension age.

PwC surveyed over 2,000 UK adults and found that a rigid state pension system, where an ‘official’ retirement age is set by the Government, doesn’t provide the flexibility people want.

PwC’s new report ‘One Size Fits None: Does the flexible workforce of the future need a flexible state pension’ says that over half (55%) of those surveyed want to retire before or at 65, with a fifth (21%) wanting to work on beyond 65, while 24% remain undecided.

When it comes to Northern Ireland, 58% of people hope to retire before or at 65, while 25% want to keep on working into later life.

Across the UK, 29% of people hope to retire earlier than the state pension age even if this means receiving a reduced state pension for the rest of their lives. But in Northern Ireland, more people than almost anywhere else in the UK - 34% - will accept a reduced pension as the price of early retirement.

And when it comes to what early retirees would do with their new freedom, a remarkable 47% of early retirees in Northern Ireland hope to start a business – that’s nearly three times the national average (17%) and well ahead of Scotland (9%), the South East of England (7%) and the next nearest region – London – where 32% of early retirees plan to become senior citizen entrepreneurs.

PwC says that providing more flexibility in the state pension system would match the reforms to workplace pensions, following the Government’s announcement in the Budget that it will no longer require people to buy an annuity at retirement.

The authors suggest that one way to tackle people’s appetite for more flexibility on when they can access their state pension is to dispense with the concept of a single state pension age and instead introduce a state pension “window.”

This would be the final essential piece of the Government’s ‘freedom and choice in pensions’ proposals by also allowing people to choose when they receive their state pension between a range of ages, and receive an adjusted amount for the life of their pension based on their chosen retirement date.

Raj Mody, head of pensions at PwC, commented:

“It is clear a one size fits all state pension age does not work anymore. A more flexible state pension system would place retirement decisions firmly back in the hands of workers and companies. 

“The current policy of gradually increasing a single state pension age focuses on overall life expectancy, but doesn’t take account of variations for different socio-economic groups and regions.

“Rather than prescribing when people can access their state pension, people should be allowed a degree of choice based on their individual circumstances.

“If the terms are set right, this approach will ultimately produce significant savings and greater sustainability of costs for the Government in the long-term - especially if life expectancy increases dramatically for some parts of the population.

Despite the Government’s outlined changes to state pension age2, meaning anyone currently in their early 50s or below won’t receive their state pension until they’re aged 67, PwC’s research reveals that 65% of UK adults still hope to retire on or before age 67, with 76% of Northern Ireland respondents having  the same aspiration.

The research by PwC’s pensions advisory group shows that, across the UK, nearly half (47%) of those who want retire early would be prepared to take a cut of more than £4501 a year for the life for the privilege of retiring just a year ahead of the state pension age.

PwC says that, as well as providing the flexibility people want, introducing a state pension window will bring greater fairness between socio-economic groups.

This approach may increase the cost to Government during an initial transition period, but should ultimately produce significant savings and make the cost of providing a state pension more sustainable in the long term.

However, the exact impact will depend on the terms of the flexibility, how people spend their retirement income; the extent to which retirees create new business activities; and how long people live.

Raj Mody said:

“A more flexible state system completes the fundamental pensions reform George Osborne is keen to deliver and will bring pensions and retirement savings firmly into the modern age where people want flexibility, choice and control.

“We need to create a state pensions system which is fairer, more stable and sustainable in the long term. Scrapping the state pension age and replacing it with a state pension window will produce better outcomes for people, companies and the Government.”


  Download State Pension Window - PwC White Paper April 2014


  1. Based on single state pension value of £144 per week.
  2. State pension age is currently set at age 65 for men, moving to age 65 for women in 2018. It will increase for both men and women to age 66 by 2020, moving to age 67 by 2028 and age 68 by the mid 2040s (although it is intended to bring this latter date forward to the mid 2030s). Under current plans, the state pension age will be reviewed every five years, with the intention that it keeps pace with how much longer we’re living.The objective is to have one third of adult life post state pension age.
  3. For further commentary on market issues, visit our pensions blog:
  4. Skyval is a web-based pensions platform which sponsors, trustees and their advisers can use as a single tool to analyse the impact of changing pensions regulations and market developments. It is now being deployed by over £80bn worth of pension schemes. For more information please visit

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