The government has accepted the recommendation in the Cridland Review that the state pension age increase should be brought forward to 68 between 2037 and 2039.
Under the current law, the state pension age is due to increase to 68 between 2044 and 2046.
In a statement in the House of Common, the secretary of state for work and pensions, David Gauke MP, said a balance had to be found between funding the state pension and being fair on future generations of taxpayers.
He told MPs: "As the Cridland Review makes clear, the increases in life expectancy are to be celebrated, and I want to make clear that even the timetable for the rise that I'm announcing today (19 July), future pensioners can still expect on average more than 22 years in receipt of the state pension.
"But increasing longevity also presents challenges to the government.
"There is a balance to be struck between funding of the state pension in years to come whilst also ensuring fairness for future generations of taxpayers."
The UK government currently spends 5.2 per cent of GDP on the state pension.
Without action this would increase to 6.5 per cent of GDP by 2039 to 2040.
The government’s proposed timetable reduces this to 6.1 per cent of GDP by 2039 to 2040 – saving each household £400, based on the number of households today, and in total saving £74bn by 2045 to 2046 compared to the currently legislated timetable.
The Pensions Act 2014 introduced a regular and structured method for considering future changes to the state pension age in light of changes in life expectancy.
This is the first government review of the state pension.
Any future changes to state pension age would have to be approved by Parliament in legislation.
The state pension age is regularly reviewed to make sure that the state pension is affordable and fair. People are living longer, and spending a larger proportion of their adult life in retirement than in the past.
Latest projections from the Office for National Statistics show that the number of people over state pension age in the UK is expected to grow by a third between 2017 and 2042, from 12.4 million in 2017 to 16.9 million in 2042.
According to the government, failing to act now in light of compelling evidence of demographic pressures would be irresponsible and place an unfair burden on younger generations.
Keeping the state pension age at 66 would cost over £250bn more than the government’s preferred timetable by 2045 to 2046.
When the state pension was introduced in 1948, a 65-year-old could expect to spend 13.5 years in receipt of it – around 23 per cent of their adult life.
This has been increasing ever since.
In 2017, a 65-year-old can now expect to live for another 22.8 years, or 33.6 per cent of their adult life.
Those affected by this proposed timetable will on average continue to spend longer in receipt of the state pension than anyone reaching state pension age in the last 25 years.
No one born on or before 5 April 1970 will see a change to their current proposed state pension age.
The change will affect everyone born between 6 April 1970 and 5 April 1978.
Speaking in the House of Commons, Debbie Abrahams MP, the shadow secretary of state for work and pensions, opposed any further increase in the state pension age from 66, saying many older people were "battling a toxic cocktail of ill health."
Ed Monk, associate director for personal investing at Fidelity International, said: "No one will rejoice at the thought of waiting longer for their state pension but the truth is that such changes are necessary if the current system is to be made sustainable.
"The population is growing, ageing and living for longer and accelerating the rise in the state pension age is just making us walk faster up a path which we were already on.
"We should not be too pessimistic about retiring later. Being 68 years old in 2037 will not be the same as being 68 in 1948, when the modern state pension was introduced. In general we’re becoming healthier and more active in later life and so better able to cope with working longer.
"Having said that, the government is right to identify the problems faced by workers in more physical jobs, and to encourage changes in the jobs market to help them cope with later retirement.
"By telling everyone now about this change, we do have a clear pathway as to when future generations should expect to retire.
"If you are around the age of 25, you can expect to retire at 70, if you’re 35 then it will likely be 69 and if you’re 45 then it’s going to be 68. This effectively gives the nation a clear expectation of where the state pension age is going for decades to come."
stephanie.hawthorne@ft.com
