The state pension age should be decreased to 63, an expert suggests, as another says it should increase to as high as 80. The Government launched a review to ensure the system is “sustainable and affordable” last week, which is due to report in March 2029, with Rachel Reeves saying that it is “right” to look at the age at which people can receive the state pension as life expectancy increases. This is currently 66, rising to 67 by 2028, with the Government usually reviewing it every six years. Experts have warned that people hoping to retire in 2050 are set to receive £800 per year less than current pensioners.
The triple lock on the state benefit – a guarantee that its annual increase will be the highest of the average earnings growth, the Consumer Price Index (CPI) inflation, or 2.5% – means that it has been estimated that the age at which people become eligible for it would have to be 74 by 2065-67 in order to keep spending at around 6% of GDP. In a previous report, Baroness Neville-Rolfe noted that this limit implies an increase to 69 between 2046 and 2048, followed by successive increases to 74 by 2067, unless “other tools” are used to limit expenditure growth.
Experts at wealth management company Aegon believe a more flexible system should be introduced, enabling earlier access to payments, Bristol Live reports.
Pensions director Steven Cameron said: “We support giving people the choice to draw it, say up to three years earlier, at a reduced amount to make it financially fair for all. An alternative would be to commit to allowing access from not later than, say, age 68, at a lower amount, even if the state pension age increases thereafter.”
He also pointed out that while people can postpone claiming their state pension beyond the qualifying age for potentially higher returns, no provision exists for early access to DWP benefits.
But Jack Carmichael, senior consulting actuary at Barnett Waddingham, has suggested that the situation is worse than feared.
The expert highlighted that the OBR’s Fiscal Risks and Sustainability report has shown the cost as a proportion of GDP will double over the next half a century, as the retired population grows relative to the amount of people working.
“The OBR’s modelling uses a high life-expectancy scenario, based on the ONS’s definition in their population projections, that results in an additional annual state pension cost of approximately £2billion in today’s terms,” Mr Carmichael told the MailOnline.
“It assumes a long-term rate of 1.9 %, rather than 1.2 %.”
This is too cautious, the expert stated, and it would be best to assume a closing of the life expectancy gap between those with the lowest and highest life expectancy.
Healthcare spending priorities over the next 50 years, will be better reflected, he argued, if those living the longest at the moment are assumed to have almost reached the life expectancy cap.
Under this viewpoint, the annual cost of the state pension would increase by approximately £8billion, Mr Carmichael said, which would be four times higher than the current model forecasts.
“To keep the cost of the state pension at a similar proportion of GDP would then require a massive increase in the state pension age, potentially up to the dizzying heights of 80,” he added.
The biggest rail workers’ union has warned that raising the state pension age would be met with protests and direct action.
RMT general secretary Eddie Dempsey said: “The UK state pension is already one of the worst in the entire developed world, which is a direct result of decades of governments transferring both our national and personal wealth to the super rich.
“Any decision to squeeze more out of working people by forcing us to work even longer would be a national disgrace.”