Pension age may rise to 67 by 2026 say ministers

12th September 2011

Speaking to the Observer this weekend, Webb said the state pension age could rise to 67 as early as 2026. The paper reports that this would affect 8.1m people in their 40s who currently expect to retire at 66.

The current timetable set by the previous Labour Government suggests increasing the pension age to 67 in 2036 and 68 by 2046.

Webb told the Observer: "The timescales for 67 and 68 are too slow. If it is 67 in the mid-2030s we will be going backwards in terms of share of your life in retirement. I mean the problem would be worse than 20 years before."

Hargreaves Lansdown head of pension research Tom McPhail believes an increase is definitely on the cards.

"We don't yet know exactly when the state pension age will increase to 67, though a ten-year acceleration so that it happens between 2024 and 2026 would be a fair bet. This would affect anyone born after 1958, with the state pension age hitting 67 for anyone born after April 1959. We may well then see the rise to 68 being fed in soon after that. The current consultation on reform of the state pension (including moving to a longevity based formula) will deliver a more permanent solution in due course," he says.

However he calculates that making up the difference of two years would mean savers in their 40s putting away £10 more a month.

But could politicians be manoeuvring themselves out of a controversial corner?

The Coalition has been under fire for increasing the state retirement age to 66 for both men and women by 2020. This has been attacked for being particularly unfair on women because it means they had very little notice that their retirement date had been postponed, giving them little opportunity to save more and make up for it. That could be particularly significant for those with health problems.

Pensions campaigner and Saga director general Ros Altmann had attacked the rapid increase to 66 as a betrayal of women. But Saga now suggests a more rapid increase after 2026 could save money and be fairer to women.

Here is a link to the Saga website.

The Saga statement says: "Backbenchers believe, rightly, that the current plans – apart from breaking a specific pledge in the Coalition Agreement, do not give people fair notice of the change – in particular, women who are already aged 57 or 58 are having their pension increased by up to 2 years under the current Pensions Bill plans. However, if pension age increase was delayed so that it only reaches age 66 in 2022, followed by a rise to 67 in the following few years, then the Government would have a fairer package of measures.  It would give people much fairer notice (over 10 years) and would still raise even more money than the current proposals."

Michelle Mitchell, a director at older people's charity Age UK agrees with much of what Saga is saying.

She told the Telegraph that any further changes to the state pension age should ensure that people have enough time to plan.

She said: "Any increase to the state pension age needs to ensure that people have enough time to plan for the change – Age UK believes that people require at least 10 years' notice.

"We also believe that the process of deciding the state pension age should be informed by independent advisers considering a range of factors."

The message boards of the Telegraph are in pessimistic mood.

pwrighter writes: "This reminds me of a conversation I had with my (then) fifteen-year-old daughter. She said: "Dad, they reckon that eventually we'll be able to live for 5000 years". Ever the pessimist my response was, "so that means we get to retire at age 4965". Now it seems we can make that 4967."

On the Guardian, Ortho is similarly exasperated.

She writes: "We're supposed to plan our retirement, are we? When I started work, I was told to plan to retire at 60. I paid in on that expectation, and planned and paid in for many years on that expectation. Then I was told I'd have to work longer. I never thought women getting it earlier was fair, but we lost without the men gaining – it wasn't an exercise in fairness, just in saving money.

"Now it looks like I'll be working the best part of ten years longer, as it's getting further away the closer I get to it- and what's worse, no agreement seems final, they just go back on it whenever they like. I don't have a pension paid for by an employer, and stopped paying into a private one when it became obvious there was less in the pot than I'd actually put into it and I'd have been better putting it in the building society, but I've never missed paying my NI ever. How can you plan when the agreements you thought you had can be changed on any government's whim at any time?"

More from Mindful Money…

Pensions: How to age-proof yours

Pensions: Not yet thanks – we're mums

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