The UK government confirmed that it would not push for a rise in state pension age to 68. It also stated that a review of this policy will be delayed until after next general elections.
The state pension for men and women is currently 66, with a projected rise to 67 in 2026. Under plans announced by ministers in 2017, it was due to slowly rise to 68 by 2037.
Mel Stride, the work and pensions secretary, said that changes in life expectancy will need to be taken into account and that no further changes would be made prior to a second review.
He stated that “Since 2017’s state pension age review, the rate of rise in life expectancy have slowed.”
The government published a report on Thursday. It stated: “For instance, in the 2014-based projections which informed the 2017 review life expectancy at 65 was projected to reach 27.3 by 2060. However, according to the most recent 2020-based projections, it is projected that it will reach 24.4 years by 2060.”
A separate report was released alongside the government’s review. Baroness Neville-Rolfe (a Tory peer) recommended pushing back the increase at 68 by four year to 2041-43, and imposing a limit of 6 percent on state pension-related expenditures up to $600,000.
The government refused to adopt Neville-Rolfe’s recommendations as part of an official investigation into the state pension age. She had not been able “to account for the long-term effect of recent significant external problems, including the Covid-19 Pandemic and recent global inflationary pressures”.
It added that “This creates uncertainty in relation to data on life expectancy and labour markets, as well as the public finances.”
According to the government, the existing 2044-46 timetable for the SPA’s rise to 68 was still in effect. However, it stated that it expects a second review to be completed within the first two year of the next parliament.
It stated that “the current rules for the increase from 67 to68 remain appropriate.”
On Thursday, pension experts raised concerns about the effect of the government’s decision regarding the public finances. The Institute for Fiscal Studies think tank suggested that delaying the rise at 68 could result in the Treasury losing £9bn per year.
David Sinclair, the chief executive officer of the International Longevity Centre (a think-tank), stated that while a delay may be politically advantageous, it is inexorable that we will receive our pensions later than the previous generations.
He said, “Failing to make the hard decision now will leave any future government with difficult financial decisions about taxation and spending reduction.”
Steve Webb, a former minister for pensions, is now a partner in LCP, an actuarial consulting firm. He said that limiting the amount of national income used on pensions could lead to a rapid rise in the age of pensions, including a rise up to 69 by the 2040s.
Webb stated, “This would represent a drastic shift in policy. It would be likely that today’s younger workers face a pension age 70 or higher.”
A public sector union also criticised the government for changing the formula to calculate pension costs at workplaces like schools and hospitals starting in April next year.
Prospect warned that employers could be charged tens to billions more for the revision, which came after a scheduled review.