The government’s plans to increase the state pension age from 66 should be delayed because we are not living as long as first expected, according to analysis.
Analysis from consultancy LCP, published this morning (December 20), found the government’s plans to raise state pension age to 67 by 2028 and 68 by 2039 have been ‘blown out of the water’ because expected improvements in life expectancy have largely failed to materialise.
It therefore argues the move to 67 should not come until 2051, 23 years later than currently planned, and the rise to 68 not before the mid-2060s.
By delaying the first increase to 2051, HM Treasury could lose out on £195bn but could benefit more than 20 million people born in the 1960s, 1970s and early 1980s.
Steve Webb, partner at LCP said: “Even before the pandemic hit, the improvements in life expectancy which we had seen over the last century had almost ground to a halt. But the schedule for state pension age increases has not caught up with this new world.
“This analysis shows that current plans to increase the state pension age to 67 by 2028 need to be revisited as a matter of urgency. Pension ages for men and women reached 66 only last year, and there is now no case for yet another increase so soon”.
A link between state pension age and longevity was established in government policy in 2013.
The first state pension age review was published in 2017 and used population estimates prepared by the Office for National Statistics as at 2014 and assumed life expectancies would continue to improve over the coming decades.
But since this last review, the ONS published population estimates as at 2016 and 2018, which reveal lower life expectancies than previously thought.
LCP’s analysis based on this suggests any move from 67 to 68 would not be needed until the mid 2060s, rather than the mid 2040s as is currently legislated, and certainly not by the late 2030s as planned by the government.
Also, the move from 66 to 67, which is currently scheduled to be phased in over a two year period between 2026 and 2028, could be put back 23 years to 2049-51.
The ONS is expected to publish its projections for 2020 early next year which will show any long-term impact from Covid-19.
LCP said that if the ONS concluded the pandemic could have a lasting negative impact on life expectancy, this could imply even further delay in state pension age increases.
Last week, the government launched a review of the state pension age to see whether the way it manages the cost is fair to taxpayers and pensioners.
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 Pensions Act 2014 requires the government to regularly review the state pension age, and it must be published by May 7, 2023.
What do you think about the issues raised by this story? Email us on FTAletters@ft.com to let us know