It has been announced that the rise in the state pension age will occur in 2039.
Seven years earlier than initially planned, the government have stated that the increase to 68 will “maintain fairness between generations”, parallel to the pace of life expectancy growth.
According to the Office for National Statistics figures, the number of those over the State Pension age is set to increase by up to a third between 2017 and 2042; rising from 12.4 million to 16.9 million.
Set out in the newly suggested timetable, the period between 2037 and 2039 will see the State Pension age rise to 68. At present, the existing legislation has the increase planned for 2044 and 2046. The amendment will mean those born between 6 April 1970 and 5 April 1978 will be affected.
Pensions and Lifetime Savings Association (PLSA) figures indicate that this could impact over 7 million people in their 30s and 40s. As this particular demographic “have not had the same access to final salary pension schemes as their parents”, the PLSA warn that they are the most at risk of inadequate private saving. Whilst their children are likely to benefit from automatic enrolment schemes, they will be too old to maximise their private savings in this way.
Commenting on the proposed amendments was David Gauke. The Secretary of State for Work and Pensions highlighted the reflective nature of the change, as well as improving the approach toward retirement saving.
“Since 1948 the State Pension has been an important part of society, providing financial security to all in later life. 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.”
However, the change has also received criticism, namely in regard to the inflexibility and affordability for older workers.
Pensions Director at Aegon, Steven Cameron drew attention to the falling pace of life expectancy growth as well as the lack of synchronisation with private pensions.
“It’s ironic that the Government is proceeding with an accelerated increase in the state pension age days after statistics show improvements in life expectancy may be levelling off, meaning this increase may be less justified on affordability grounds. A blanket increase in state pension age will be particularly concerning for those who through health concerns, job pressures or lack of employment opportunity simply can’t keep working into their late 60s.
“Requiring everyone to wait till an ever increasing age to draw a state pension is inflexible and increasingly out of sync with private pensions which can be taken from as early as age 55 and offer people a flexible and personalised transition into retirement. The clear message is that anyone who wants more choice over how and when they retire can’t rely solely on a state pension and should be reviewing their workplace or private pension provision.”
