Govt reportedly delays plans to increase state pension age to 68

The government has reportedly delayed plans to raise the state pension age (SPA) to 68 amid concerns over life expectancy in the UK and warnings from Tory MPs.

The SPA is currently 66, with two further increases already set out in legislation: 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.

A review of the SPA was launched in late 2021, and aimed to 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.

However, the Financial Times has reported that although the government had been looking to bring this forward to 2037-39, with the plan due to be confirmed in May, it will now push the decision beyond next year’s election.

According to the Financial Times, a senior Tory MP warned of the “critical juxtaposition” of scrapping the lifetime allowance for pension savings while asking ordinary voters to work until 68 for a state pension, with a government insider telling the FT: “They were gung-ho to raise the pension age. But they got cold feet.”

Indeed, concerns around a potential state pension controversy in the UK had grown amid reports that the government was planning to increase the SPA, with these concerns also heightened by the recent experience in France, as plans to increase the SPA by two years to 64 by 2030 have been met with protests across the country.

Standard Life, managing director, Dean Butler, also pointed out that when rumours of a planned increase were first reported in January "it prompted thousands of people to go online with 110,000 searches for ‘retirement age’ recorded".

"This was an 82 per cent on the same period last year, highlighting just how significant the issue is for many people.," he added.

“Those currently in their early fifties were the first that could have been impacted by the changes and these would have been particularly challenging for a number of groups.

"Those planning to start accessing their personal savings before for SPA would have had to consider whether they would have stretched far enough to bridge the gap, while others would have faced an extended period in the workforce.”

Aegon pensions director, Steven Cameron, also argued that the news could be a “big relief to many” if it proves true, emphasising that "having certainty and stability around when your state pension will commence is essential for future planning".

He continued: "There had been speculation that the SPA might have been increased from age 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 per cent increase for state pensioners. While just falling short of the 10.4 per cent 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.”

Adding to this, Pensions and Lifetime Savings Association (PLSA) director of policy and advocacy, Nigel Peaple, stated: “If it’s true that the government has decided to not bring forward the date at which the SPA will rise to 68, it is a very positive step for future pensioners because the state pension makes up the majority of retirement income for most people.

"Moreover, increases in the SPA fall disproportionately on people with lower incomes who generally have poorer longevity.”

Quilter head of retirement policy, Jon Greer, also suggested that the Conservative Party may be looking to "claw back some public favour amongst its core voters by delaying its widely anticipated SPA increase".

He continued: "The rumours come just as Boris Johnson faces a grilling over his party gate antics putting those lockdown scandals back at front of mind for many. 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.

Greer also pointed out that the number of people over SPA is forecast to grow "significantly" over the next 20 years while the proportion of the working age population to support them will start to fall, warning that the delay in 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," he added.

"Overall the government aspire to aim for ‘up to 32 per cent’ in the long run as the right proportion of adult life to spend in receipt of the state pension. As a compromise if they choose not to raise the age then it does not leave the government 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."

Commenting in response to the reports, a Department for Work and Pensions (DWP) spokesperson said: “The government is required by law to regularly review the state pension age and the next review will be published by 7 May.”

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