The UK government has reportedly postponed plans to increase the state pension age to 68, in the light of a drop in life expectancy.
This potential change in plan follows the scrapping of the lifetime allowance in the Spring Budget, enabling pension savers to build up their pensions without incurring a tax charge. Labour described the move as a “tax cut for the rich”.
The raise in the pension age could also risk eliciting a negative response from middle-aged members of the voting public, unhappy at being forced to work for longer.
The UK state pension age is set to rise to 67 by 2028 and 68 by 2046 based on the current timetable. But media reports surfaced earlier this year suggesting the rise to age 68 could be brought forward to the 2030s.
A review of the state pension age is due to be published by 7 May this year.
Crowd-pleasing policies
Commenting on the reports, Jon Greer, head of retirement policy at Quilter, said: “Any increase would have proven incredibly unpopular whichever way you cut it. We may see more of these crowd-pleasing policies as we head towards the general election.
“The plan to delay has been reportedly due to average lower life expectancy. However, it is forecast that the number of people over state-pension age will grow significantly over the next 20 years while the proportion of the working-age population to support them will start to fall.
“The delay to increasing the age therefore does put the state pension’s long-term sustainability into the spotlight. This could be the government simply kicking an inevitability down the road for the next party to take government to deal with.
“Overall, the government aspires to aim for up to 32% in the long run as the right proportion of adult life to spend in receipt of the state pension. If they choose not to raise the age, then it does not leave it with many levers it can pull.
“It may leave the government with the choice of reviewing the triple lock and replacing it with a less generous uprating mechanism and/or accepting that funding for state pensions is going to increase through higher taxes (or national insurance). But it’s a question of what the general public would dislike least because we face difficult decisions.”
Big relief to many
Steven Cameron, pensions director at Aegon, added: “It will be a big relief to many if as reported, the government has shelved plans to accelerate increases in the state pension age.
“Having certainty and stability around when your state pension will commence is essential for future planning and official confirmation from the government would be most welcome.
“There had been speculation that the state pension age might have been increased from 67 to 68 a few years earlier than planned. If this had happened in 2035 rather than 2038, it would have meant millions currently aged between 52 and 55 would have had to wait a year longer to receive it.
“From 6 April, the state-pension triple lock will deliver a 10.1% increase for state pensioners. While just falling short of the 10.4% inflation rate announced today, it is still good news for state pensioners. However, it comes at a high cost which is met from the national-insurance contributions of today’s workers. Many believed that to sustain funding, the government would increase the state pension age sooner.
“However, life expectancy at retirement is now lower than previously assumed, which takes some pressure off the future cost of state pensions and avoids a controversial state-pension-age hike in the run-up to a general election.”
