What sounds like a technical policy review could turn into a financial body blow for millions. New figures show that millions are set to lose nearly £18,000 overnight if Labour presses ahead.
Work and pensions secretary Liz Kendall has kicked off a new review into the state pension age, which will examine whether to make people work longer as life expectancy grows but the economy is squeezed.
While the review was due by 2029, Labour has brought it forward, fuelling speculation about imminent changes. The Institute for Fiscal Studies has already warned that the pension age might need to rise to 74 by 2068, thanks to spiralling public costs and demographic strain. Some say it could hit 80.
Almost half of working-age adults are saving nothing for retirement, with 15million classed as “undersaving”. The low-paid, self-employed and ethnic minorities are especially vulnerable.
Kendall admitted the UK faces “huge challenges”, with many more concerned about feeding their families than preparing for retirement. But while this crisis has been brewing for years, chancellor Rachel Reeves’s economic mishandling has brought it to a head.
If she won’t cut spending elsewhere, raising the pension age is one of the few levers she has left. Ordinary workers will foot the bill. Today, we’ve learned what that looks like.
Anyone caught by a rise in the state pension age could lose almost £18,000 in today’s money. That’s how much those aged 51 to 53 would miss out on if the pension age now rises to 68 from 2039, five years earlier than originally planned.
The state pension is 66 today but slated to start rising to 67 from 2026.
Those turning 51 this year would lose £16,436, while a 52-year-old would miss out on £16,114. For those aged 53, the figure is £15,798.
The forecasts assume the state pension rises each year by 2.5%, in line with the triple lock backstop.
Younger workers in their 20s, 30s or 40s will lose even more than £18,000, as the state pension continues to rise year after year. Remember, this is based on an increase to 68. The losses will be even greater if the state pension is hiked to 69, 70 or beyond.
This is money people were expecting, based on years of national insurance contributions. But it may be snatched away at the stroke of a Treasury pen.
Rebecca Williams at Rathbones warned that today’s workers already face a far less generous retirement than their parents. “Cracks are beginning to show in the system.”
Chancellor Rachel Reeves is desperately struggling to balance the books, but she’s completely boxed herself in. She cannot cut spending after the disability benefits rebellion, while having to spend billions housing illegal immigrants.
Reeves has pledged not to break her own fiscal rules or raise the big three taxes of income tax, national insurance or VAT.
The state pension triple lock is becoming increasingly expensive, but scrapping it would be political suicide. Pushing the retirement age ever higher is the easier option. It doesn’t show affect people right away. But as Rathbones shows, when it hits, it hits hard.
Keir Starmer, Liz Kendal and Rachel Reeves will be long gone by then, with any luck. But millions of pensioners hit by these changes will be worse off for the rest of their lives.