We’re all living longer – and it’s creating an economic abyss that’s projected to cost the Government a small fortune unless they take serious action. In a move set to enrage both retirees and those approaching retirement, an independent review for the UK Government has recommended raising the pension age to combat the ticking retirement time-bomb.
The UK pension age is already set to increase over the course of the next thirty years, from 67 in 2028 up to 68 by the year 2046. But the independent review, undertaken by Government-backed independent pension age reviewer and former director-general of the CBI John Cridland, suggests that the current rise isn’t quick enough.
It suggests that between 2037 and 2039 the pension age should rise from 67 to 68. Or, to put it another way, if you’re born after 1971, you won’t be claiming a state pension until you’re 68-years-old.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, was quick to point out that the report’s findings meant bad news for younger generations.
‘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. 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.’
He also noted that ‘this report also looks like the death-knell for the state pension triple lock.’ The lock, which guarantees your state pension rises in line with inflation, average earnings or 2.5% (whichever’s highest) should be ‘withdrawn in the next parliament’. It’s not a recommendation that will endear him to pensioners up and down the country, who have been promised by the Government that the triple lock isn’t going anywhere.
Jan Shott, the National Pensioners Convention’s general secretary, was scathing of Cridland’s axing of the triple lock, accusing him of ‘bizarrely recommending that everyone should see the value of their state pension fall by axing the triple lock. There can be little doubt that the future of the triple lock will now become a key election issue in 2020 for all generations.’
Elsewhere, there are recommendations to introduce a pensioner apprenticeship scheme, and having us all take a ‘mid-life MOT’, designed to persuade us to seriously consider our health, work and retirement. It also suggests offering means-tested support for those one year under pension age who find themselves unable to work.
It’s a suggestion welcomes by former pensions minister Baroness Altmann, who claims there’s ‘no economic or social rationale’ to the triple lock, but 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.’
Cridland’s review also considered bringing in a variable pension age, which would have seen changes across the country according to regional life expectancies – an idea that was swiftly dropped by the panel.
At this stage, of course, the review is just that – a review of pensions as they are, and how they must in the future. But Cridland’s report forms a part of the Government’s wider review into pensions, due to be published in May, and many industry figures agree with the overall recommendations. Discussing the review, a bullish Damian Green, Work and Pensions secretary, 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.’
And with forecasts suggesting that an extra 1% of GDP will be needed for state pensions by 2037 – the equivalent of a £725 annual tax increase on households – there’s a very real and worrying possibility that our pension age will rise quicker than previously thought.