Britons could once again be eyeing up working until their 70s after the Government announced a new review of the official retirement age. Work and Pensions Secretary Liz Kendall has brought in Suzy Morrissey, of the Pensions Policy Institute, to examine the “merits” of automatic increases, examining how other comparable countries link payments to life expectancy.
These include Denmark, which already has a state retirement age of 70, four years higher than Britain’s current level. The warning comes after former Chancellor Jeremy Hunt tried to hike the retirement age to 68 by the late 2030s, but backed down after evidence showed the country’s life expectancy was falling in parts of the country. While campaigners for older Britons say the debate is finely balanced, experts have warned that a pension age that automatically rises each year based on life expectancy would cause “chaos” to people’s retirement planning.
Sir Steve Webb, the former pensions minister, warned: “Having a completely automatic formula to move from changes in life expectancy to changes in state pension age could cause chaos for people’s financial planning.
“Every time the population projections are updated, this could move the dates for pension age changes by up to a decade, which would make it impossible for people to plan for their retirement finances.
“Having a rigid rule for setting pension ages creates more volatility and uncertainty than an approach which is more based on judgment and taking into account a wider range of factors.”
Dennis Reed, the chief executive of campaign group Silver Voices, said it is clear Labour is now “leaving the door open” with its new review.
Mr Reed warned: “It’s an issue that needs to be grappled with, but they can’t just raise the state pension age because they want to save money.”
He set out three issues that must be considered by any review, including life expectancy data; whether people are living healthy lives in older age that allow them continue working for longer; and a renewed focus on ending employment discrimination against older people.
The state pension will rise to 67 next year, and is currently scheduled to rise to 68 by 2046.
Ms Morrissey said her review would make recommendations “in light of the long-term demographic pressures the country faces”.
She noted that spending on the state pension has increased by 19% over the past decade, and 70% over the last 20 years in real terms.
A government spokesman said: “Supporting pensioners is a top priority, and thanks to our commitment to the triple lock, millions will see their yearly state pension rise by up to £1,900 by the end of this parliament.
“We have also run the biggest-ever campaign to boost pension credit take-up, with nearly 60,000 extra pensioner households being awarded the benefit, worth on average around £4,300 a year.
“But we know there is a real risk that tomorrow’s pensioners will be poorer than today’s, which is why we are reviving the Pension Commission, to tackle the barriers that stop too many people from saving.”
