State PensionApr 26 2017

Examining the retirement age

Search sponsored by
Examining the retirement age
ByJohn Wilson

A  final report on state pension age (SPA) arrangements from 2028, when SPA will have reached 67, has been published by John Cridland CBE, the SPA independent reviewer appointed by the government.  

The report makes several recommendations, including that the SPA should rise to 68 between 2037 and 2039, and should not increase by more than one year in any 10-year period. On the triple-lock for state pension increases, the review also proposes that, if further savings are needed to ensure fiscal sustainability, they are more appropriately delivered by moving in the future to uprating the pension by earnings. The review recommends the triple-lock is withdrawn in the next Parliament.

For the basic state pension, there is a statutory requirement to uprate it at least in line with earnings. However, the government has a commitment to uprate it according to the triple-lock – the highest of earnings inflation, price inflation or 2.5 per cent.

The Cridland review proposes that some of the funding released by changes in SPA and other aspects of the state pension system should be reinvested to support disadvantaged groups.

The review believes there are measures that can help give people reliant on state pension some of the same flexibilities as those who have private pension provision. 

n  It recommends that people who defer their pension should have the option to be rewarded through a lump sum once they start drawing their state pension (currently, state pension can be deferred, and it will be increased, but there is no option to take the increase as a lump sum).

n  It recommends that people over the SPA should be able to part drawdown their state pension – leaving the balance to benefit from the deferral arrangements.

n  It does not recommend an ‘early retirement’ option be introduced for the state pension. If the recommendations are accepted then, as now, there will be no access to state pension before SPA.

Separately, a report on how SPA timetables might need to change beyond 2028, based on projections of life expectancy in future, has been published by the Government Actuary’s Department (Gad). 

Under the two scenarios considered, the report concludes that the SPA could rise to 69 either between 2040 and 2042 or between 2053 and 2055. Under one scenario it is also stated that the SPA should increase from 69 to 70 over the two-year period from 6 April 2054 to 5 April 2056. 

Why is SPA being reviewed?

In a word – cost.