The UK government’s ongoing review of the state pension age (SPA) has raised concerns about the potential for significant changes in the coming years. With life expectancy increasing, the Department for Work and Pensions (DWP) is considering whether the state pension age should automatically adjust in line with these changes. This review could pave the way for the state pension age to rise to an unprecedented 70, marking a significant shift in the UK’s retirement framework.
Currently, the state pension age is 66 for both men and women, with plans in place to increase it to 67 between 2026 and 2027, and to 68 between 2044 and 2046. However, according to Money Week, the Labour Party’s review into the SPA will assess the potential for future automatic adjustments linked to life expectancy trends, which could see the state pension age increase further.
The Financial Pressures Behind the Review
The driving force behind this review is the financial sustainability of the state pension system. The increasing life expectancy of the UK population places greater strain on government finances, particularly as the number of retirees continues to rise. According to experts, an automatic increase in the state pension age could help mitigate these pressures, ensuring that the pension system remains viable in the long term.
The government has stated that the review will consider how similar policies are managed in other countries, such as Denmark, which recently raised its retirement age to 70. By exploring these international examples, the review aims to strike a balance between the financial needs of the state and the welfare of pensioners. However, there are concerns that pushing the pension age higher could disproportionately affect people in more physically demanding jobs or those with shorter life expectancies.
The Social and Economic Impact of Raising the State Pension Age
While the financial rationale for raising the state pension age is clear, the social implications are more contentious. Experts such as Catherine Foot from Standard Life’s Centre for the Future of Retirement have cautioned that increasing the state pension age could deepen inequality, particularly for those in lower-income groups. Foot suggests that while this change may relieve pressure on public finances in the short term, it could lead to greater hardship for individuals unable to work longer due to health issues or the physical demands of their careers.
Lily Megson-Harvey, from My Pension Expert, also points out the importance of considering the wider impact on savers. As people are living longer, many will be depending on their pensions for a more extended period, which raises the stakes for effective pension planning. Megson-Harvey stresses that any changes to the state pension age must carefully address how these shifts will affect those at the lower end of the income spectrum, where pension savings are often less robust.
Dr Suzy Morrissey, who is leading the review, notes that decisions regarding the state pension age have “far-reaching” consequences for the population. “Most of us will expect to receive at least some state pension once we reach state pension age,” she says. “I have been asked to make recommendations on a framework that the secretary of state can use when considering future state pension age arrangements, in light of the long-term demographic pressures the country faces.”
David Pye, a client consulting director at Broadstone, sees the review as a crucial step for long-term planning. He emphasises that with an ageing population, governments have often used rising pension ages as a tool to control costs, particularly when public finances are under strain. However, he warns that if the state pension age is raised, or if the amount provided is reduced or means-tested, it will highlight the urgent need for reform in the private savings sector to ensure adequate retirement incomes.
