Upcoming reassessment of state pension ages raises questions about potential quicker increases in the future.
The UK Government has initiated the third State Pension Age Review, a necessary step according to some experts, as the country grapples with the challenges of an ageing population and the financial sustainability of the pension system.
The review, officially known as the State Pension Age Review, is set to develop a framework to guide the Secretary of State in setting future State Pension ages. It will take into account long-term demographic pressures and strive for a balance between fairness and sustainability.
The current state pension age for men and women is 66, and it is scheduled to rise to 67 between 2026 and 2027. The state pension age will eventually rise to 68 in the years 2044 to 2046.
The review will consider various factors, including the merits of linking pension age to life expectancy, the role of State Pension age in managing pension sustainability, and international experiences with automatic adjustment mechanisms for pension age decisions.
Two independent reports have been commissioned for the State Pension Age Review. One report is by Dr Suzy Morrissey, and the other is by the Government Actuary's Department. The reports will provide a comprehensive evidence base with impact assessments across different groups, regions, and nations, and gather expert and stakeholder views on social and economic impacts.
The Government Actuary's Department report will assess whether current pension age rules maintain a consistent proportion of adult life spent in retirement and recommend changes if needed. The review will also consider the latest life expectancy data, impacts of previous pension age changes, fiscal costs, and effects on taxpayers and pension recipients.
Experts such as Lily Megson-Harvey, policy director at My Pension Expert, note that not everyone can simply work for longer. Therefore, the review will need to carefully consider the impact that raising the age further could have on millions of savers, particularly those who are already struggling to save enough and often rely more heavily on the state pension for financial security in retirement.
Damon Hopkins, head of DC workplace savings at the consultancy Broadstone, expects an acceleration in the increase of the state pension age. Potential recommendations could include changing how State Pension age is linked to life expectancy or adopting automatic adjustment mechanisms to adjust pension age in response to demographic and economic changes, thereby ensuring fairness between generations and sustainability of the pension system into the future.
Kirsty Anderson, a retirement specialist at the wealth manager Quilter, suggests that any acceleration in the rise to 68 must be justified with updated life expectancy data. The review will also explore how best to support an aging population and their opportunities to work.
The second State Pension Age Review was published in March 2023. By law, the government is required to review the state pension age every six years. The combination of an ageing population and the huge fiscal cost of the state pension suggests that a change in the state pension age is inevitable. The review will consider the impact of these changes on the UK's economic and social landscape.
[1] Source: Government website [2] Source: Pension Policy Institute [3] Source: The Guardian
- The third State Pension Age Review, aimed at balancing fairness and sustainability, will study factors such as linking pension age to life expectancy and the role of State Pension age in managing pension sustainability.
- Experts like Lily Megson-Harvey have raised concerns about the potential impact of raising the state pension age further on millions of savers, particularly those who struggle to save enough for retirement.
- The Government Actuary's Department report will investigate whether current pension age rules maintain a consistent proportion of adult life spent in retirement and recommend changes if needed.
- The review will also delve into how best to support an aging population and their opportunities to work, addressing the challenges presented by the country's ageing population.
- Some experts, like Damon Hopkins, anticipate an acceleration in the increase of the state pension age, possibly including changes in how State Pension age is linked to life expectancy or implementing automatic adjustment mechanisms.
- The second State Pension Age Review was published in March 2023, acting in accordance with the law, which mandates a review of the state pension age every six years.
- According to reports from sources like the Pension Policy Institute and The Guardian, the combination of an ageing population and the fiscal cost of the state pension suggests that a change in the state pension age is inevitable, with far-reaching implications for the UK's economic and social landscape.
