23rd March 2017
The under 30s may not receive the state pension until they are 70 due to strains on the public finances from increasing life expectancy, a report by government experts has warned.
The Government Actuary’s Department, which advises the UK government on issues to do with life expectancy, pensions and spending says that the move may be necessary if the state pension is to continue to be affordable.
It comes as another independent report into the state pension is published by former CBI boss John Cridland. It says that state pension age should rise to 68 between 2037 and 2039 meaning that those under 45 now may have to work a year longer before receiving the state pension.
Cridland also argues that there should be no increase in the state pension age from 68 to 69 before 2047 at the earliest, and that the pension age should never rise by more than one year in each ten-year period.
Cridland’s wide reaching review has also suggested that the triple lock on the current state pension, which sees it rise by either 2.5%, average earnings or the Consumer Price Index each year, depending on which is greater, be abandoned in the next Parliament.
It has also suggested that the Government discount the idea of allowing early access to the state pension on grounds of ill health but has suggested there may be grounds to provide a mean-tested benefit for certain vulnerable people in their sixties and more account taken of those who care for elderly relatives.
Some MPs and campaigners have argued that the current arrangements are unfair for those in generally poorer areas of the UK, who tend to die earlier and thus receive less money across their retirement.
Alistair McQueen, head of saving & retirement at Aviva says: “The long-standing state pension ages of 65 for men and 60 for women were set in 1948 at a time when life expectancy at birth was 66 for a man and 71 for a woman. Today these life expectancies have risen by more than a decade, to 79 and 83 respectively. Life expectancy is only one consideration, but it does suggest the state pension age can’t stand still.
“All concerned must carefully consider Cridland’s recommendations. If Parliament does agree to further change, there are important responsibilities that come with change.
“Changing the state pension age is one thing. Ensuring all understand these changes and are helped to adapt is the real challenge.”
Cridland Review’s key recommendations
The Government Actuaries Department has considered two scenarios – one where a person spends exactly a third of their life in retirement on average and one where they spend 32% depending on different views about average life expectancy. This may seem like a small change but the GAD reckons the first requires two rises in the state pension age, the second three rises.
Under the 33.3% scenario, it suggests the state pension age should increase from 67 to 68 over the two-year period from 6 April 2039 to 5 April 2041 and from 68 to 69 over the two-year period from 6 April 2053 to 5 April 2055.
Under the 32% scenario, the state pension age should increase from 67 to 68 over the two-year period from 6 April 2028 to 5 April 2030. It should increase from 68 to 69 over the two-year period from 6 April 2040 to 5 April 2042 and then increase from 69 to 70 over the two-year period from 6 April 2054 to 5 April 2056.