05 February 2024
If you are covering the International Longevity Centre’s report that the UK will need to increase the state pension age to 71 by 2050, please see the following comment from Jon Greer, head of retirement policy at Quilter:
“This morning’s report from the International Longevity Centre claims the UK’s state pension age will have to rise to 71 by 2050 to keep up with life longer life expectancy and maintain the status quo of the number of workers per state pensioner.
“Just last year, the government attempted to claw back public favour amongst its core voters by delaying its widely anticipated state pension age increase. At the time, the plan to delay was reportedly due to average lower life expectancy, but the ILC’s data suggests this may no longer be the case as it says that while the stall in life expectancy has temporarily eased the pressure for increases beyond 67 after 2027, in the longer term the pressure will mount.
“It is forecast that the number of people over State Pension age will grow significantly over the coming years whilst the proportion of the working age population to support them will start to fall. Figures from the ONS released just last week show the number of people aged 85 and over could grow in the next 15 years from 1.6 million to 2.6 million. Not only will this heap pressure on in terms of state pension cost, but it will also result in a dire strain on social care and an urgent need for increased funding. This morning’s report puts the state pension’s long term sustainability into the spotlight and the government’s decision to delay last year may mean it has simply kicked an inevitability down the road for the next party to take government to deal with.
"The IFS previously suggested that a one-year increase in the state pension age in the late 2030s would likely save around £8-9 billion a year. However, delaying the planned rise in the state pension age to 68 by seven years would cost at least £50 billion. Any increase would prove incredibly unpopular so the government is highly unlikely to backtrack on its decision to wait until after the general election. However, if this is the case, it may be left with the choice of reviewing the triple lock and replacing it with a less generous uprating mechanism and/or accepting that funding for state pensions is going to increase through higher taxes or national insurance.
"For those concerned about how any state pension changes will impact them, it should be known that the framework for reviewing the state pension age sets out that there should be a minimum of 10 years’ notice for individuals affected by changes so that they can adequately plan, so there should therefore be no immediate concern for anyone. However, upping contributions to a pension can help make sure that if you do end up having to wait longer to access your state pension then you have enough private pension wealth to bridge the gap. Alternatively, you may want to save into different savings vehicles such as ISAs so that you can draw on that before you reach an age when you can get access to the state pension. The most important piece of advice is to take ownership and make a plan; don’t leave it too late."
