Why the state pension age should stay on hold.

 

Should plans to accelerate increases to the state pension age be delayed because of worse than expected life expectancy?

 

A new report suggests it would be unfair to increase the state pension age from 66 because life expectancy has not improved as before.

 

Under current legislation, the state pension age would increase from 66 to 67 by 2028 before rising again to age 68.

 

According to pensions consultant LCP, life expectancy improvements have stalled; therefore, the state pension age should remain unchanged at age 66 for the next 30 years.

 

The report follows a recently launched government review of the state pension age, designed to make its recommendations in 2023.

 

As things stand, the new state pension for people who reach state pension age after April 2016 is £179.60 a week, assuming a full contribution record.

 

Those who reached state pension age before April 2016 receive the old state pension, at £137.60 a week, with access to a Pension Credit top-up for some retirees.

 

Men and women both have a state pension age of 66 after it increased from 60 for women and 65 for men.

 

The government currently plans to increase the state pension age to 67 by the end of this decade and then to 68 as soon as 2039.

 

The scheduled increases to state pension age are based on forecasts of improving life expectancy and an expectation that retirees spend no more on average than a third of their adult life in receipt of the state pension.

 

Covid-19 has thrown a spanner in the works for those calculations, with official longevity forecasts already being scaled back before the onset of the pandemic.

 

The pandemic itself is likely to have significantly dented progress with improving life expectancy.

 

Consultant LCP argues that the state pension age increase to 67 should not now take place until 2051, with the rise to age 68 delayed until the mid-2060s.

 

While delaying increases to the state pension age would benefit approximately 20 million people born in the 1960s to early 1980s, it would also cost the taxpayer around £200 billion.

 

Steve Webb, a partner at LCP and a former pensions minister, said:

 

“The government’s plans for rapid increases in state pension age have been blown out of the water by this new analysis.

 

“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.”

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