State PensionJun 19 2018

Government forced to explain state pension maths

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Government forced to explain state pension maths

The government must detail changes to future state pension review calculations that could increase the retirement age for millions, after a petition from union Prospect on the issue surpassed 10,000 signatures.

Currently legislation means that the secretary of state is expected to formally review the state pension age on a regular basis.

When this policy was introduced under the Pensions Act 2014, a key underlying principle was that people should expect to spend up to a third of their adult life over SPA on average, which was interpreted as 33.3 per cent.

When delivering his report on the state pension review last July, the then secretary of state for work and pensions David Gauke said government would only allow for 32 per cent in future reviews.

According to Prospect, under current mortality assumptions, this change could would mean that thousands of millennials will end up working until they are 70.

The government will now have to address the topic, as Prospect’s petition achieved more than 12,000 signatures.

According to Mike Clancy, Prospect’s general secretary, it is “very important that government is forced to explain why it believes that future generations should expect to spend a lower proportion of their adult lives in retirement”.

He said: “In doing so, they have ignored their own independent reviewer [John Cridland] who recommended that 32.87 per cent was an appropriate proportion to use.

“We need an open and honest debate about the impact of this proposal before any changes are implemented.”

Mr Cridland’s review recommended the state pension age should be brought forward to 68 between 2037 and 2039 because of increases in life expectancy.

The change will leave 7.6 million people £10,000 worse off, according to analysis by the House of Commons Library.

The government will be spending £96.6bn with the state pension in 2018 to 2019, according to an estimate from the Department for Work and Pensions (DWP), 3 per cent more than the forecast value in 2017 to 2018.

maria.espadinha@ft.com