Decision on state pension age rise to 68 to be delayed
Help for 43-54 year olds as decision on raising state pension age to 68 is delayed until after next general election
- The government was rumored to be considering accelerating the age increase to 2035
- Life expectancy projections are less optimistic and a move would cause setbacks
- Critics warned that sick and poor people and carers would suffer
The state pension age for men and women is now 66 and will be raised to 67 between 2026 and 2028
The government is postponing a decision on raising the state pension age to 68 until after the next elections.
Rumors that it was considering speeding up the age increase to 2035 – now affecting those between about 43 and 54 years old – led to warnings that sick and poor people and carers would bear the brunt.
The move would be “incredibly unpopular” and likely “political suicide,” according to pension commentators who also pointed to widespread protests in France in response to a planned increase in the retirement age to 64.
The government is expected to cite lower average life expectancies as a reason for delaying a decision – but the move is also likely to revive debate over whether the ‘triple lock’ on annual increases in state pensions is affordable.
The state pension will rise by 10.1 per cent in April, with the full flat rate set at £203.85. The old state pension, which is topped up with S2P and Serps entitlements if you’ve earned them, goes up to £156.20.
The state pension age for men and women is now 66 and will be raised to 67 between 2026 and 2028.
Officially, the next increase to 68 is scheduled between 2044 and 2046, but a previous government review recommended bringing the change forward to 2037-2039.
And recent reports suggested it is considering raising the age by 2035, affecting those born between 1968 and 1979.
“Given we’ve seen literal riots in the streets in France in response to a proposed increase in the state pension age, it’s no surprise that the UK government has moved away from the idea of a planned rise in the UK state pension age. accelerate. to 68,” says Tom Selby, chief of retirement policy at AJ Bell.
With less than two years to go before the general election, raising the state pension age faster would probably have been political suicide for the Conservatives, who are already trailing Labor in the polls.
The decision will be a huge relief for people in their late 40s and early 50s who may have had to wait 12 months longer for their state pension.
Given that we’ve literally seen street riots in France in response to a proposed increase in the state pension age, it’s no surprise that the UK government has backed down
“Raising the state pension age more quickly would also have been arguably unfair, as average life expectancy has actually fallen recently, while projections of future improvements in life expectancy have also been significantly scaled back.”
Jon Greer, head of pensions policy at wealth management company Quilter, says: ‘The Tories seem understandably determined to try to win back some public favor with their key constituents by delaying the long overdue increase in the state pension age.
Any increase would have proved incredibly unpopular and we may see more of these public-friendly policies as we head towards the general election.
The plan to postpone is reportedly due to the average lower life expectancy. However, it is predicted that the number of people over the state pension age will increase significantly over the next 20 years, while the share of the labor force supporting them will begin to decline.
The Institute for Fiscal Studies suggests that an annual increase in the state pension age by the end of the 2030s would probably save around £8-9 billion a year in today’s terms. However, delaying the planned increase in the state pension age to 68 by seven years would cost at least £50 billion.
“It may leave the government the choice of reviewing the triple lock and replacing it with a less generous revaluation mechanism and/or accepting that state pension funding will increase through higher taxes (or national insurance).”
Under the triple lock, the AOW increases each year with the highest income growth, inflation or 2.5 percent.
In terms of life expectancy, the tables below from AJ Bell compare the official projections in 2014 with those in 2020.
In 2014, the Office for National Statistics predicted that by 2028, the average life expectancy of a 67-year-old man would be 21.1 years and that of a woman would be 23.1 years.
The latest estimates for 2028 bring that down to 18.7 years for a man and 20.8 years for a woman.
The pandemic has skewed the numbers and the government may say it needs more time to see how that has affected life expectancy in the future.
Source: AJ Bell analysis of ONS data