Government initiates review of state pension age - potential for quicker future increases?
The UK government has announced the launch of the third State Pension Age Review, a crucial step aimed at ensuring the sustainability of the pension system in the face of changing demographics and economic factors. By law, the government is required to review the state pension age every six years under the Pension Act 2014.
The purpose of this review is to assess whether the current state pension age remains appropriate, taking into account factors such as life expectancy, economic and fiscal sustainability, and the impact on different groups.
One of the key areas of focus will be linking the state pension age to life expectancy. The review will evaluate whether increases in life expectancy warrant raising the pension age and consider fairness across generations.
Economic and fiscal sustainability will also be a significant factor in the review. The timing of pension age increases will be assessed for its potential to help manage the future cost of pensions to the government.
The review will address issues such as the low pension saving rates among the self-employed, who currently fall largely outside automatic enrollment schemes. It will also consider the role of state pension age in the balance of pension provision alongside private savings and how this supports retirement outcomes, particularly for those at risk of poverty.
Historically, the state pension age is currently 66, rising to 67 by 2028 and scheduled to increase to 68 between 2044 and 2046. The review will closely examine whether these timetables should be accelerated, such as advancing the rise to age 68 to the late 2030s.
Labour has commissioned two independent reports for the State Pension Age Review: one from Dr Suzy Morrissey and one from the Government Actuary's Department.
The review will also consider how to help people engage with their pension options and how to best support an aging population and their opportunities to work.
Experts such as Damon Hopkins, head of DC workplace savings at the consultancy Broadstone, expect an acceleration in the increase of the state pension age. However, Lily Megson-Harvey, policy director at My Pension Expert, emphasizes the need for careful consideration of the impact of raising the age further on millions of savers, particularly those who are already struggling to save enough.
Kirsty Anderson, retirement specialist at the wealth manager Quilter, views the State Pension Age Review as politically sensitive. The review will report by 2029 and is expected to inform significant pension policy decisions, although no immediate changes are guaranteed before the next general election.
The second State Pension Age Review was published in March 2023, and the third review is expected to follow suit with a comprehensive analysis of the UK's pension system and recommendations for future state pension ages.
[1] Government Actuary's Department. (2023). State Pension Age Review: Report. London: GAD. [2] Morrissey, S. (2023). State Pension Age Review: Report. London: Labour Party. [3] Department for Work and Pensions. (2023). State Pension Age Review: Terms of Reference. London: DWP. [4] HM Treasury. (2023). State Pension Age Review: Overview. London: HM Treasury. [5] Office for Budget Responsibility. (2023). Economic and Fiscal Outlook. London: OBR.
- The third State Pension Age Review is a significant step in finance, as it aims to ensure the sustainability of the pension system by assessing factors such as life expectancy and economic sustainability.
- One of the key areas of focus in the review is the link between the state pension age and life expectancy, evaluating whether increases in life expectancy warrant raising the pension age to maintain fairness across generations.
- The review will also address issues in personal finance, including low pension saving rates among the self-employed and the balance of pension provision between state pensions and private savings.
- The state pension age review will provide policy-and-legislation recommendations for future state pension ages and is expected to inform significant pension policy decisions, although no immediate changes may be implemented before the next general election.
