personal finance

State pension plans: pressure set to grow on UK government


Official data revealing a slowing pace of life expectancy increases have cast doubt on government plans to raise the age at which people may start claiming their state pension.

The Office for National Statistics (ONS) forecast in 2014 that by 2028 — when the state pension age is set to rise from 66 to 67 — the average life expectancy for a 67-year-old man would be 21.1 years, while for a woman it was expected to be 23.1 years

However, the agency’s latest projections suggest that by 2028 the same 67-year-old man is expected to have a life expectancy of 18.7 years, while for a 67-year-old woman it is expected to be 20.8 years.

The downward revision puts pressure on UK policymakers to rethink planned increases in the state pension age to 67 affecting 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.

“Although we are all still expected to live longer, downward revisions in projected life expectancy improvements will almost certainly be seized upon by campaigners to pressure the government into rethinking state pension age rises,” said Tom Selby, head of retirement policy at AJ Bell, an investment platform.

“Given life expectancy is rising at a slower rate than previously thought, you could argue plans to increase the state pension age to 67 and 68 should be pushed further into the future — or even cancelled altogether.”

The data come just weeks after the government launched an independent review into the state pension age (SPA), which will consider whether the proposed rise increase to age 68 should be brought forward to 2037-39, as proposed in 2017, before tabling any changes to legislation.

Experts said the government faced a “tricky” decision on whether to quicken the pace of future rises in SPA, given pressure on the state pension was expected to significantly increase.

Over the coming century, the proportion of pensioners in the population is expected to increase from 17.7 per cent in 2020 to 28.5 per cent, according to ONS data also released this week.

“Pensioner power is on the rise. Over a fifth of boys and well over a quarter of girls born in 2045 are projected to live to at least 100,” said Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, the investment manager.

“This is great for those of us who get to live longer lives, but given that we’re also having fewer children, it means fewer people shouldering the burden of a much larger state pension bill. It leaves the government with a tricky balancing act.”

The government said this week that it was too early to speculate on the outcome of the state pension age review, expected to conclude by next year.

“The state pension continues to provide the foundation for retirement planning and financial security in older age,” said the Department for Work and Pensions.

“The government is required by law to regularly review state pension age and recently launched the second state pension age review. The review will consider whether the rules around state pension age are appropriate, based on a wide range of evidence including latest life expectancy data.”



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