The Work and Pensions Secretary, David Gawke, has announced that millions of people in their late 30s and early 40s will have to work for an extra year after an official review recommended pushing up the state pension age (SPA) more quickly than previously planned. The Secretary has previously stated that he believes the “triple lock” is unsustainable.
The Cridland report stated that the age for state pensions should rise to 68 by 2039 instead of 2046. It also recommended that the state pension “triple lock” is withdrawn in the next parliament.
John Cridland, former director-general of the Confederation of British Industry and the author of the independent report, said the aim was to “smooth the transition for tomorrow’s pensioners, and to try and make the future both fair and sustainable”.
Cridland’s report said that whilst an increase to 68 had been legislated for in the Pensions Act 2007, but that life expectancy projections had changed since then, adding
“Forward projections for the public finances suggest that they are, and will continue to be, under pressure. On the balance of likelihood, the 2046 date will need to be pulled somewhat forward … We believe there is merit in giving future pensioners as much forward notice of this change as is possible.”
A spokesman said:
When the modern State Pension was introduced in 1948, a 65-year-old could expect to spend 13.5 years in receipt of it – 23% of their adult life. This has been increasing ever since. In 2017, a 65-year-old can now expect to live for another 22.8 years, or 33.6% of their adult life.
Failing to act now in light of compelling evidence of demographic pressures would be irresponsible and place an unfair burden on younger generations. Keeping the State Pension age at 66 would cost over £250 billion more than the government’s preferred timetable by 2045/46.
Who is affected by today’s announcement?
Under the proposed new timetable, the State Pension age will increase to 68 between 2037 and 2039, earlier than the current legislation which sees a rise between 2044 and 2046. The change will affect everyone born between 6 April 1970 and 5 April 1978.
Another report hints at even later retirement for millenials
A separate report from the Government Actuary’s Department, also out today, seems to point towards the state pension age rising to 70 for anyone currently aged 30 or under.
Secretary of State for Work and Pensions David Gauke said in a statement:
“As life expectancy continues to rise and the number of people in receipt of State Pension increases, we need to ensure that we have a fair and sustainable system that is reflective of modern life and protected for future generations.
“Combined with our pension reforms that are helping more people than ever save into a private pension and reducing pensioner poverty to a near record low, these changes will give people the certainty they need to plan ahead for retirement.”
Pensioners ‘can expect ill health at work’
Shadow Work and Pensions Secretary Debbie Abrahams’ described the increase announcement as ‘shocking’ after new research released yesterday revealed that life expectancy was ‘stalling’. She said:
“Most pensioners will now spend their retirement battling a toxic cocktail of ill health, with men expecting to drift into ill health at 63, five years earlier than the proposed Cridland pension age at 68, while women expect to see signs of ill health at 64. This national picture masks even worse regional inequalities. If you live in Nottingham, for example, men are likely to suffer ill health from the age of 57 – a full 11 years earlier than this government’s plan for a 68 pension age.
“The government talks about making Britain fairer but their pensions policy – whether it is about the injustice 1950s-born women are facing, or today’s proposal to increase SP age to 68 – is anything but fair.”
The Department for Work and Pensions announced that the planned changes would need parliamentary approval.
TUC General Secretary Frances O’Grady said the move risked creating ‘second class citizens’:
“Hiking the state pension age risks creating second-class citizens. In large parts of the country, the state pension age will be higher than healthy life expectancy. And low-paid workers at risk of insecurity in their working lives will now face greater insecurity in old age too.
“A decent retirement is a right for us all, not a privilege for the few. Rather than hiking the pension age, the government must do more for older workers who want to keep working and paying taxes. Workplaces and working patterns need to adapt to their needs.
“And the government must follow the independent review’s recommendation to give more help to those unable to stay in work until retirement age.”
Graham Peacock, Managing Director, Salvus Master Trust, reacting to the news, said:
“The news that the state pension age is to rise faster than expected runs contrary to the government’s messaging in recent weeks. The new Treasury Minister, David Gauke, had ruled out any fundamental changes to the pensions landscape, and yet, today the Government is announcing a once-in-a-generation adjustment to the state pension age, which could potentially affect millions. While it’s heartening to see that pensions haven’t slipped quite so far down the list of priorities as many had feared, it also adds to the impression of a topsy-turvy Government, which is not able to keep to its word, which is less of a good thing, not just for pensions, but for the wider economy.
“So we need to ask what has driven this decision – why is it happening now? One interpretation could be that the Government is finally understanding the true cost of the triple lock and desperately looking for ways to claw back this expense, after all, it is duty bound by the agreements with the DUP to leave the triple lock intact. The problem is that, once again, the burden is falling on the young: the new age will apply to those aged under 47. Trust is going to be a real issue now for those affected by this change, and many are rightly going to be concerned about whether the state pension could eventually be phased out altogether before those at the younger end are old enough to draw their pensions.
“I suspect many of us in the industry will be looking closely at the finer details now, as such a change will necessitate a huge programme communication and engagement – this could amount to one of the biggest public information programmes seen since the second world war. The last time a change to the state pension age of this magnitude was implemented – with the raising of the SPA for women – those in charge of the country at the time failed miserably to get the message across to the stakeholders. There will be no room for error this time round – failure to deliver could see the trust in pensions irrevocably destroyed.”