Personal Pension  

Fresh data to fuel calls for further retirement age rises

The number of people of state pension age is projected to increase by 31 per cent from 12.3m last year to 16.1m by mid-2037 despite planned increases to the age people can begin claiming benefits, according to new data published by the Office for National Statistics.

ONS said the rise reflects the higher number of people who were born in the 1960s ‘baby boom’ reaching state pension age within the 25 year period to mid-2037.

Over the same period, the number of people of working age - which for the purposes of the report is those aged between 16 and state pension age - is projected to rise at a far slower rate of 12 per cent from 39.4m in mid-2012 to 44.2m by mid-2037.

This means by this time there will be 2.7 working age people for each pensioner, down from a ratio of 3.2 last year.

Moreover, the gap between the number of people claiming pension benefits and those under the age of 16 is set to rise from around 300,000 in mid-2012 to more than 3.1m by by mid-2037, suggesting the demographic imbalance could widen further in the coming years.

Following reforms announced in 2011 by the government, the state pension age is set to increase to 66 between 2018 and 2020 and to 67 between 2026 and 2028.

The latest data will add fuel to arguments that the government should raise the retirement age sooner and faster.

Last year, the Institute of Directors argued that the UK government should raise the retirement age to 70 as soon as possible.

In its Roadmap for retirement reform 2012, the IoD argued that increasing longevity is the “elephant in the room” for the pensions industry and that the current plan for increasing retirement age is not strong enough.

Instead of a plan culminating in a state pension age of 68 in 2046, the IoD called for a pension age of 68 in 2032, 69 in 2038 and 70 in 2044.

Following the Autumn Statement in 2011, pensions expert John Lawson warned the government’s plan to increase pension age in line with life expectancy could mean clients’ children retiring at 73.

He estimated that people in 2011 who were aged between 2 to 9 would receive the state pension in 2067, aged 73. Those aged between 9 to 16 would receive pension benefits in 2060 at age 72; 16 to 23 years olds would receive benefits aged 71 in 2054; 23 to 30 year old would retire at age 70 in 2047 and 30 to 37 year olds would retire in 2040, aged 69.