The government is expected to save £11bn as a result of increases to the state pension age, according to analysis by Aegon.
Last week, men and women’s state pension age was equalised, bringing up the women’s age by five years, from 60 to 65. By 2020, the age will increase to 66, and under current government plans will hit 68 by 2039.
According to Aegon, increases to the state pension age mean around 670,000 people each year will have to wait longer before benefitting. In time, this could save the Government £11bn a year in state pension payments, which would otherwise need to be raised through national insurance. However, Aegon said the saving may well be needed to fund the increased costs of NHS and social care funding as our society ages.
The full amount of the new state pension is currently £164.35 per week or £8,546 per year. However, only those with 35 or more years of national insurance contributions receive this. Assuming everyone received the full level, if 670,000 a year miss out on a year’s worth of state pension, that will save the government £5,725m each year. Looking ahead beyond 2028, around 670,000 people at age 65 and a similar number aged 66 waiting longer for their state pension will generate double, or around £11,450m in savings to the government, Aegon explained.
Those due to celebrate their 65th birthday in the 12 months starting 6 December 2018 are the first group in almost 100 years to have to wait longer to receive their state pension. In mid-2017, there were 326,933 men and 345,922 women aged 65. While the exact numbers vary year on year, this means around 670,000 people celebrate their 65th birthday in any 12 months.
Since 1925, when the state pension age was set at 65 for men, there have been major improvements in life expectancy. Figures from the Office for National Statistics show that in 1931, males at age 65 might expect to live for another 11.3 years on average and women for a further 13.07 years. The equivalent figures for 2011 show that males aged 65 that year were expected to live on average for 18.32 years and women for 20.88 years.
Commenting, Aegon pensions director Steven Cameron said: “Hopefully, these increases [to the state pension age] won’t come as a shock and will have been communicated better than to the Waspi women who saw their state pension age increase by five or more years.”