The government has launched a review of the state pension age to see whether the way it manages the cost is fair to taxpayers and pensioners.
The second state pension age review, announced yesterday (December 14), will look at whether the rules around pensionable age are appropriate, based on the latest life expectancy data and other evidence.
The Department for Work and Pensions will also consider whether it should bring forward the rise in the age at which people become eligible for the state pension to 2037-39.
The state pension age is currently 66 and two further increases are already set out in legislation, including a gradual rise to 67 for those born on or after April 1960; and a gradual rise to 68 between 2044 and 2046 for those born on or after April 1977.
The Pensions Act 2014 requires the government to regularly review the state pension age, and it must be published by May 7, 2023.
The DWP said the review will examine the implications of the latest life expectancy data and provide a “balanced assessment of the costs of an ageing population” as well as future state pension spending.
It will also look at labour market changes, in particular whether people work beyond state pension age, and will come up with a legislative timetable for the state pension age that is “transparent and fair”.
Thérèse Coffey, secretary of state for work and pensions, said: “As the number of people over state pension age increases, due to a growing population and people on average living longer, we need to make sure that our decisions on how to manage the costs of state pension provide fairness to both taxpayers and pensioners and that it continues to provide the foundation for retirement planning and financial security.”
A rise to 68 from 2037 would affect people born from the early 1970s onwards, rather than those born since the late 1970s, potentially pushing full retirement back for millions more people, said Becky O’Connor, head of pensions and savings at Interactive Investor.
She added: “Many will have spent much of their working life expecting to retire at 65. They have been disappointed before and look set to be disappointed again. It’s no wonder today’s younger workers have little faith in the state pension being there for them at all when they stop work, with many thinking they’ll end up working forever.
“Continually moving the goalposts back like this doesn’t just provoke disillusionment, it has big implications for retirement planning."
The government has also commissioned two independent reports to contribute to the evidence-base that will inform the state pension age review.
One will be carried out by the Government Actuary which will analyse the latest life expectancy projections.
The other will be carried out by Baroness Neville-Rolfe and will consider recent trends in life expectancy and the range of metrics the government could use when setting the state pension age.