Britain's state pension age should increase to 68 by 2039, an independent review recommends.
In addition, the existing “triple lock” guarantee, which ensures the state pension increases in line with the highest of inflation, average earnings, or 2.5 per cent, should be scrapped during the next parliament
John Cridland, who was appointed as the UK government's independent reviewer of state pension age last year, said the state pension age should increase from 67 to 68 between 2037 and 2039. This would mean that anyone born in or after 1971 would not be eligible for a British state pension until their 68th birthrate. Those born as early as 1969 could be affected.
Pension experts have warned that those in their 30s and younger may eventually face the possibility of drawing their pension at 70.
The British state pension age is already due to go up in stages, with a rise to 67 by 2028. The next increase to 68 is not due to happen until 2044-2046. But the review said the rise to 68 should happen seven years earlier than planned. This would provide greater “intergenerational fairness” and help the fiscal sustainability of the state pension.
In Ireland, the state pension age rose to 66 at the start of 2014 and is due to rise to 67 in 2021 and 68 in 2028.
Third of adult life
The report will help inform the British government’s review of the state pension age, due in May. In 2013, the coalition government said that someone should spend up to a third of their adult life above state pension age on average.
The UK government actuary’s department has been asked to consider two alternative scenarios for the state pension age, reflecting someone spending either 32 per cent or 33.3 per cent of their projected adult life in retirement.
Under a 32 per cent scenario, it found the state pension age could rise to 69 between 2040 and 2042. Under a 33.3 per cent scenario, the age could rise to 69 between 2053 and 2055.
Projections suggest that an additional 1 per cent of GDP will need to be spent on the state pension by 2036-2037. The report said the same rise in spending today would be equivalent to a rise in taxation of £725 per household per year.
The UK government has committed to maintaining the triple lock throughout the current parliament. But the report recommended that “the triple lock is withdrawn in the next parliament”.
“This report is going to be particularly unwelcome for anyone in their early 40s, as they’re now likely to see their state pension age pushed back another year,” said Tom McPhail, head of retirement policy at Hargreaves Lansdown. “For those in their 30s and younger, it reinforces the expectation of a state pension from age 70, which means an extra two years of work.
“This report also looks like the death-knell for the state pension triple lock.”
Other recommendations in the report include:
* People over the state pension age should be able to draw down part of their state pension if they want to, leaving the balance to benefit from the deferral arrangements. This could benefit people who want to carry on working part-time.
* A “mid-life MOT” should be introduced to encourage people to take stock, and make realistic choices about work, health and retirement.
* There should be a drive for older workers to become apprenticeship mentors and trainers.
* Statutory carers’ leave should be introduced to help those with caring responsibilities.
* Means-tested support should be available for pensioners, set one year below state pension age from the point at which the increase to 68 is introduced, for those who can’t work because of ill health or caring responsibilities.
The possibility of varying the state pension age to reflect varying life expectancies across the UK was also raised. But the report said having regional variations was not practical.
Work and Pensions secretary Damian Green said: "As government goes about making its decision on the future state pension age in May of this year, these contributions and recommendations will provide important insight."
Baroness Altmann, also a former pensions minister, said: "I would like to see more allowance for people to get their state pension earlier if, for example, they are in poor health or started work exceptionally young, perhaps in tough industrial jobs, and genuinely cannot keep going till nearly 70."