John Cridland believes the state pension age could increase to 68 by 2039
The state pension age could increase to 68 by 2039 – seven years earlier than planned, according to former CBI director general John Cridland, the Government’s independent reviewer of state pension age.
And the triple lock guarantee which sees the State Pension rise by at least 2.5 per cent should be scrapped during the next Parliament.
If the recommendations are taken up, people now in their 40s face their state pension age being pushed back a year meaning more than five million people – around 750,000 people a year for seven years – would be forced to wait longer for the state pension.
Those workers currently in their 30s and younger may eventually face the possibility of drawing their pension at 70.
The 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 between 2044 and 2046.
The change of the pension age could come seven years earlier than planned
But the Cridland Review said the rise to 68 should happen seven years earlier than planned, providing greater “intergenerational fairness”, and helping the fiscal sustainability of the state pension.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “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. This report also looks like the death-knell for the state pension triple lock.”
Former pension minister Sir Steve Webb, now director of policy at Royal London, said: “If the Government goes ahead with the more radical timetable for pension age increases they would be guilty of misleading Parliament.
People currently in their 30s and younger could be expected to work until they are 70
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“In the last Parliament MPs voted for the new arrangements on state pension age increases on the basis that people would spend two years in work for every one year in retirement.
“On this basis, no one at work today would have a pension age of 70. But on the more aggressive schedule that the government is considering, everyone in their twenties would have a pension age of 70.
“This is not what Parliament voted for and is clearly driven by the Treasury. It is one thing asking people to work longer to make pensions affordable, but it is another to hike up pension ages because the Treasury sees it as an easy way to raise money.”
The report, which focuses on state pension age arrangements beyond 2028, will help inform the Government’s review of the state pension age, due in May.
The Government Actuary’s Department has also 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.
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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 state pension age could rise to 69 between 2053 and 2055.
There are currently 305 pensioners for every thousand people of working age.
By the time people approach retirement nearing 2050, there will be 357 pensioners for every thousand people of working age.
Nearly £100bn a year is currently spent by the Government on the state pension and pensioner benefits.
Projections suggest an additional one per cent of GDP will need to be spent on the state pension by 2036-37.
The report said if the same rise in spending was faced today, this would be equivalent to a rise in taxation of £725 per household per year.
The Government has committed to maintaining the triple lock, which ensures the state pension increases in line with the higher of inflation, earnings, or 2.5 per cent, throughout the current Parliament.
But the report said: “We recommend that the triple lock is withdrawn in the next Parliament.”
Other recommendations in the report include allowing people over state pension age 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.
The Government will make its decisions on the future of state pension age in May this year
A “mid-life MOT” should be introduced to encourage people to take stock, and make realistic choices about work, health and retirement and more older workers should be encouraged to become apprenticeship trainers.
The report also recommends that statutory carers’ leave should be introduced to help those with caring responsibilities.
Means-tested support should be available for pensioners should be set one year below state pension age from the point at which the increase to 68 is introduced, for people who are unable to work through ill health or because of caring responsibilities.
The possibility of varying the state pension age to reflect varying life expectancies across the country had also been raised.
But the report said having regional variations to the state pension age was not practical.
Responding to the report, 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.”