Government to review state pension age

The government has launched its next review of the state pension age, looking at whether the current rules around pensionable age are appropriate based on the latest life expectancy data and other evidence.

The state pension age is currently 66, with two further increases already set out in legislation: a a gradual rise to 67 for those born on or after April 1960; and a gradual rise to 68 between 2044 and 2046 for those born on or after April 1977.

However, the government is required to regularly review the state pension age under the Pensions Act 2014 , with this latest review to be published by 7 May 2023.

This is the second such review undertaken, and will consider whether the increase to age 68 should be brought forward to 2037-39 before tabling any changes to legislation, as recommended by the government's first review in 2017.

Announcing the plans, the Department for Work and Pensions emphasised that, as the number of people over state pension age increases, the government needs to make sure that decisions on how to manage its costs are "robust, fair and transparent for taxpayers now and in the future".

In light of this, the review will consider a range of evidence, including the implications of the latest life expectancy data and labour market changes and people’s ability and opportunities to work over state pension age.

It will also provide an assessment of the costs of an ageing population and future state pension expenditure and develop options for setting the legislative timetable for state pension age that are "transparent and fair".

The review has been met with mixed response, however, as Interactive Investor head of pension savings, Becky O'Connor, warned that "continually moving the goalposts back like this doesn’t just provoke disillusionment, it has big implications for retirement planning".

“Millions more people could face having to work for longer before they get their state pension as a result of this review. The idea of a long, enjoyable retirement seems set to be consigned to the history books," she explained.

“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, with many thinking they’ll end up working forever."

O'Connor also warned that for those who find they can no longer work before they reach age 68 because of age-related ill health, the inability to claim state pension could present "huge issues".

“There are big inequalities in health and consequent ability to work for people in their sixties around the country," she argued. "Life expectancy hasn’t been rising across the board recently and so does not offer the same justification it once did for endlessly increasing the state pension age.”

However, Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, suggested that the review could "put the brakes on rises in the state pension age".

She stated: "With increases in life expectancy slowing and the long-term impact of Covid as yet unknown, this review comes at an interesting time.

"However, the government must also balance this with meeting the enormous ongoing cost of the state pension, 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.”

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