Fears that the State Pension age (SPa) could rise to 70 have been allayed – for now – as the Government announced it plans to stick to the current timetable for increases.
A further review into the age at which a state pension can be claimed will be carried out in the next Parliament, but in the meantime, the next rise – from 66 to 67 – is due to be introduced between April 2026 and April 2028.
Experts believe the SPa could still return to 70 – which it was when state pension was first introduced in the early 20th century.
But under the existing plans, the next increase, from 67 to 68, will happen between April 2044 and April 2046. There is due to be further discussion within two years of the next Parliament. The Government remains committed to the principle of providing 10 years’ notice of changes to the SPa.
The Government’s review was informed in part by a report from the Government Actuary that set out the results of calculations illustrating when SPa would increase under different scenarios.
How pension age is calculated
The report considered what the timetable may look like for different target proportions of adult life being spent in retirement and different projections of life expectancy. Other assumptions were prescribed by the Secretary of State, such as the age someone starts their working life and the life expectancy tables to be considered.
The calculated SPa timetables are shown to be highly sensitive to the proportion of adult life in retirement and to the life expectancy assumptions adopted.
Recent slowing improvements in life expectancy and the unknown long-term impact of the COVID-19 pandemic make projecting future trends even more uncertain.
Sustainability of the State Pension
A report from Baroness Neville-Rolfe explained there are many factors to take account of when setting the SPa timetable. These include sustainability and affordability, as well as intergenerational fairness.
Her recommendations included two metrics:
- the proportion of adult life that people should, on average, expect to spend in retirement should be up to 31 per cent
- the Government should set a limit on State Pension-related expenditure of up to six per cent of Gross Domestic Product
Based on these metrics, SPa would increase to 68 between 2041 and 2043.
The government welcomed the findings from the Government Actuary and Baroness Neville-Rolfe. It also noted a level of uncertainty in relation to the longer-term data on life expectancy, labour markets and the public finances.
Due to this uncertainty, the Government concluded that the current rules for the rise to 68 remain appropriate. It does not intend to change the existing legislation prior to the conclusion of the next review which is planned to be within two years of the next Parliament.
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Source: New feed