A so-called hard Brexit that puts the brakes on immigration could lead to the state pension age increasing by 18 months for workers under the age of 40, according research from Hymans Robertson.
The consultancy firm said this was because of a potential fall in migration which could put pressure on the state pension age.
If migration falls by 150,000, as researchers at Kings College London forecast it will in the face of a hard Brexit, the state pension age would need to rise by 18 months by 2050 to keep dependency ratios at their current levels.
The dependency ratio is the number of economically active people of working age supporting the number of dependent people not of working age.
Jon Hatchett, partner and head of corporate consulting at Hymans Robertson, said the speed with which this happens depends on how immediate the expected net drop in working age migrants plays out.
He said: “Unfortunately we’re already in a position where state pension age is playing catch up with improvements in life expectancy.
“John Cridland, with his independent review of state pension age currently underway, already has a tough job in making recommendations that are both fair and affordable.
“Dramatic changes to migration make this balancing act even harder. If migration does fall, so too will the number of workers to support the increasing numbers of people of pensionable age.
“Undoubtedly this will put pressure on the affordability of the state pension, and as a result the age at which you can claim it.
“If this scenario does play out then it will require broader policy responses.”
He said that if greater numbers of people have to stay in the workforce for a lot longer, the Government would need to consider policies to support them, such as doing more to promote flexible working.
Under the Office for Budget Responsibility’s central projection the old-age dependency ratio is 305:1000 today and it is projected to be 360:1000 in 2050.
Hymans Robertson predicts that if there was a drop in migration of 150,000, then the increase to SPA would need to be around one and half years to keep the dependency ratios the same.
damian.fantato@ft.com
