Based on the policy of linking state pension age to life expectancy, there is “no case” to raise the state pension age from 66 to 67 until 2051, 23 years later than currently planned, analysis from LCP has suggested.

The research found that whilst this change would deprive the Treasury of at least £195bn in planned savings on state pension expenditure, it could give a “reprieve” to more than 20 million Brits who would otherwise face an increase in their state pension age.

The government recently launched its second Section 13 review of the state pension age, which is expected to look at whether the proposed increase to age 68 should be brought forward to 2037-39.

An increase to age 68 by 2041 was previously recommended by the Government Actuary's Department (GAD) 2017 review of the state pension age, with the government then confirming that it would aim to reach 68 by 2039, although it did not change the law at that time.

However, LCP noted that population estimates from the Office for National Statistics have since revealed lower life expectancies than previously expected, re-running GAD’s calculations to consider the impact of this.

This analysis revealed that any move from 67 to 68 would not be needed until the mid 2060s, rather than the mid 2040s as scheduled under current legislation, and "certainly not by the late 2030s" as proposed by the government.

It also suggested that the move from 66 to 67, which is currently scheduled to be phased in over a two-year period between 2026 and 2028, could be put back twenty three years to 2049-51.

The consultancy acknowledged that delaying the increase to age 67 until 2051 would have a “massive impact on the public finances”, however, estimating the total cost to the Treasury from this revised timetable at around £195 billion, ignoring ‘second round’ effects on tax revenues, benefits spending and the wider economy.

However, LCP noted that a further round of ONS projections for 2020 is expected in the new year, in what will be the first figures to reflect any potential long-term impact from Covid-19, warning that this could imply even further delay in state pension ages.

LCP partner, Steve Webb, commented: “The government’s plans for rapid increases in state pension age have been blown out of the water by this new analysis.

“Even before the pandemic hit, the improvements in life expectancy which we had seen over the last century had almost ground to a halt.

“But the schedule for state pension age increases has not caught up with this new world.

“This analysis shows that current plans to increase the state pension age to 67 by 2028 need to be revisited as a matter of urgency. Pension ages for men and women reached 66 only last year, and there is now no case for yet another increase so soon.”

Commenting in response, a DWP spokesperson said: “The state pension continues to provide the foundation for retirement planning and financial security in older age.

“The government is required by law to regularly review state pension age and has just announced the beginning of the second state pension Age review.

“The review will consider whether the rules around state pension age are appropriate, based on a wide range of evidence including latest life expectancy data.”

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