The state pension age would have already increased to 74 if it had kept up the same pace as life expectancy improvements, research from Hymans Robertson has said.
It has also been revealed, that if the state pension age were set at 74, it would allow for a weekly amount of £320, instead of the current amount of £160. Conversely, the government could instead keep the amount the same and save £50bn in state pension costs.
However, as the average life expectancy in the UK is 81, only seven years would be spent in retirement if the retirement age were set at 74. For those aged 65, healthy life expectancy is 76, so only a couple of years of retirement would be spent in good health.
Hymans Robertson partner and head of corporate consulting Jon Hatchett noted that the debate of the state pension age has been raging. “While UK average life expectancy is now 81, averages mask huge disparities. At one end of the spectrum the number of telegrams sent by the Queen to those reaching 100 has risen from 24 in 1917 to nearly 7,000 today.
“At the other, life expectancy in the most deprived parts of the country is a couple of decades lower than more affluent areas. Life expectancy improvements amongst all but the better off households have more or less stalled this decade, with many putting the blame on government austerity measures.”
He believes that given the disparity between life expectancy across the country, it is right that we are not all retiring at 74, as people should “not be dropping down dead” in the workplace.
“We looked at these figures to demonstrate just how much the situation has changed. It underscores the need to commit to the changes suggested by Cridland in his recent review of state pension age, and to bring forward the increase to 68 between 2037 and 2039.”
In addition, Hymans Robertson explained that future pensioners may not be able to have the luxury of a long retirement, which current pensioners do. Hatchett said that the idea of a ‘third age’ of retirement is a very recent cultural phenomenon.
“People love the idea of a couple of decades or more travelling, holidaying with friends and kick-starting new hobbies. But from a financial point of view, is that sustainable, particularly in the context of three quarters of workers not saving enough for retirement? These years of leisure come at a substantial cost, as highlighted by the deficits of most defined benefit pension schemes.
“As recently as the 1970s, 80 per cent of retired households were subsisting on less than £10,000 a year in today’s money. For typical pensioners it was a completely different world to the one they live in today. The Victorian’s invented childhood as we know it, and the baby boomers have invented a new ‘retirementhood’, but without huge societal change it is under serious threat.”