The Government has launched a review of the state pension age, and will consider the merits of bringing forward the date at which this is increased to 68.
Currently a gradual rise from a state pension age of 66 to 68 is planned between 2044 and 2046, but the review will look at the merits of introducing this between 2037 and 2039.
Two independent reports have been commissioned, the first from the Government Actuary’s department, which will look at life expectancy projections, and a second to be led by Baroness Neville-Rolfe, which will also consider what needs to be considered when setting the state pension age.
The review will take into account the findings from these reports will conclude in May 2023.
If this increase goes ahead this will affect those born in the early 1970s. Those born later – from the late 1970s – are already scheduled to have a later retirement date, whereas those born in the 1960s, or before will remain unaffected.
The DWP said the review will:
- examine the implications of the latest life expectancy data
- provide a balanced assessment of the costs of an ageing population and future state pension expenditure
- consider labour market changes and people’s ability and opportunities to work beyond the state pension age
- develop options for setting the legislative timetable for state pension age that are transparent and fair
Announcing this review the government said it would consider regional inequalities as well as “the effects for individuals with different characteristics and opportunities”.
Interactive investor head of pensions and savings Becky O’Connor says: “Millions more people could face having to work for longer before they get their state pension as a result of this review.
“Many will have spent much of their working life expecting to retire at 65. They have been disappointed before and look set to be disappointed again. It’s no wonder today’s younger workers have little faith in the state pension being there for them at all when they stop work. Continually moving the goalposts back like this doesn’t just provoke disillusionment, it has big implications for retirement planning.”
Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey adds points out that this could halt projected increases to the state pension age.
She says: “With increases in life expectancy slowing and the long-term impact of Covid as yet unknown, this review comes at an interesting time.
“Part of the review will look at changes in life expectancy. While it had been proposed that the increase in State Pension Age to age 68 should be moved forward to 2037-39 — from 2044-46 — an analysis of the latest life expectancy data as part of this review could stop this in its tracks.
“It will also consider other factors that feed into the debate on state pension age. This includes regional differences and should open the debate about healthy life expectancy — the ability to keep working.
“Recent data from Public Health England showed a man in Kensington has a life expectancy at birth of 84.2 and a healthy life expectancy of 61.3. Meanwhile a man in Blackpool has a life expectancy of 74 but a healthy life expectancy of 53.7.”
Morrissey adds that this review might spark a wider-ranging look at state pension provision. “The government must ensuring the state pension remains sustainable in the long term while keeping track of changing working patterns and ongoing cost.
“With a Covid bill to pay the triple lock has come under intense pressure, and earnings data has been abandoned for this year in favour of an inflationary increase. It raises the possibility that this review could prompt a closer look at the triple lock.”