The think tank Centre for Social Justice is proposing to increase the state pension age to 75 by 2035 – with an initial rise to 70 by 2028 – alongside a series of other proposals to support older workers.
Currently, the age at which individuals can claim their state pension is set to rise to 66 by 2020, 67 between 2026 and 2028, and 68 between 2044 and 2046.
But advisers have said it is too soon to change a system that is still being embedded.
Jon Page, director at Neon Financial Planning, said the life expectancy in the UK is currently 82 for women and 79 for men, so “asking people to pay into something for their entire working lives to receive payment back for a handful of years is hardly likely to go down well”.
He also noted that this was especially true for “a young generation who already do not trust or see the value in personal pensions”.
One of the arguments used by the think tank, chaired by Iain Duncan Smith MP, former secretary of state for Work and Pensions, was that the state pension bill has increased from £17bn in 1985/86 to £92bn in 2016/17, representing an increase from 3.9 to 4.6 per cent of GDP.
But Mr Page said if the current model is “really that unsustainable, then greater emphasis on making people more self-sufficient through financial education needs to start when people are young”.
Paul Stocks, financial services director at Dobson & Hodge, stressed there was a danger that savers would associate the state pension age increase with their workplace or personal pensions.
He noted that policy makers needed to be careful to ensure there “isn't a feeling of a two-tier state system, whereby those who feel they can't work any longer can't draw their state pension whilst there's others who don't want it yet and are happy to defer”.
Mr Stocks also said it felt like there was a desire to change a new system before it's even bedded in.
He said: “Auto enrolment is still new, relatively speaking, state pension ages are still to go up. Just another change to the, arguably already damaged, concept of pensions.”
Gem Durham, independent financial adviser at Obsidian, said increasing the state pension age to 75 in 16 years felt too soon, as people would have to figure out how to finance an extra £8,000 a year in today’s money, which “feels insurmountable”.
She questioned if this topic would maintain its momentum if a general election was called.
She said: “I’m looking forward to hearing what the other parties have to say about this report – it’s a problem that’s not going to go away but will be hugely unpopular with voters.”
Mike Lacey, partner at Berkshire-based financial adviser firm Bowman Pension Consulting, believes the state pension age will increase - despite the success of auto-enrolment – but not by as much as was suggested.
He added: “This won’t have a great deal of impact on those able to secure (and afford) the services of IFAs but for the average UK earner, the prospect of having such a jump in SPA would be a real burden.”
On the other hand, David Hearne, chartered financial planner at Satis Wealth Management, believes the state pension age should be raised, but a change in concept should go alongside it.
He said: “I would like to see us all disassociate the state pension age from our own retirement date, and instead plan to retire based on our own objectives, not on current government policy.
“State pension should be seen as an insurance and provision against the risk and cost of longevity and old age.
“Increasing state pension age, alongside better working age benefits for those unable to work through illness or caring responsibilities should mean that limited state resources are directed at people when they need it.
“Right now, the state is paying pensions to many people in their 60s who are happily working and don’t necessarily need their state pension.”
maria.espadinha@ft.com
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