Posted on March 29th, 2017 | Categories - Pensions
A new report has recommended the age that you can start receiving the State Pension should be increased faster than currently scheduled.
The in-depth review, conducted by John Cridland, concluded that the State Pension age should be changed to 68 by 2039; seven years earlier than currently planned. The review ran alongside a study conducted by the Government Actuary’s Department (GAD) which estimated that the State Pension age could rise to 70 by 2054.
Mr Cridland, former Director General of the Confederation of British Industry (CBI), raised several key points. Titled The Smooth Transition, the report noted that:
• The State Pension age should rise to 68 by 2039
• Early access to the State Pension should not be given to people with poor health
• The State Pension age should continue to increase but by no more than one year in any 10-year period
• The current ‘triple lock’ protection system should be scrapped and replaced with a link to earnings
State Pension age to rise to 68 by 2039
The recommendation that the State Pension should be pushed back to 68 by 2039 is predicted to affect 5.4 million people aged 45 and under. The current State Pension age is 63 for women and 65 for men, with a timetable set out to gradually increase both ages to 68 by 2046. The report suggests that bringing the change forward by seven years could cut pension costs by £100 billion a year.
Why is the State Pension age rising? Put simply, we are living longer. According to the Office for National Statistics, the number of centenarians living in the UK is expected to rise from 6,000 today to 56,000 by 2050.
This increase in lifespan was explored by the GAD, who were also commissioned to provide an estimate of when the State Pension age could be increased.
The findings showed that whilst these scenarios were considered extreme, the State Pension age could reach 70 by 2054, affecting people born after the 6th of April 1986.
No early access for people with poor health
Pressure on the Government to allow
• People in poor health
• People who have had a longer working life than the average
early access to the State Pension was also discussed.
The verdict was that whilst early access should not be allowed, additional means-tested support could be made available one year before the State Pension age.
Another key point that Mr Cridland suggested was a change to the ‘triple lock’ protection system that was put in place in 2010. ‘Triple lock’ means that the State Pension is guaranteed to increase by whichever of the following factors is the highest:
• The rate of inflation as measured by the Consumer Price Index (CPI)
• Average earnings
The Government has committed to keeping the ‘triple lock’ system in place until the end of this Parliament, so for now nothing is set to change until at least 2020.
The report, which took a year to compile, considers factors such as long term affordability, fairness to current and future generations of pensioners and consistency with supporting fuller working lives. The points raised will be a starting point for a potential change in the State Pension system.
With the focus very much on increased life expectancy, Mr Cridland stated: “My review considers the consequences of an ageing society. The aim is to smooth the transition for tomorrow’s pensioners, and to try and make the future both fair and sustainable.”
Raising the State Pension age has been a money saving technique for this and previous governments, but with life expectancy increasing every year, only time will tell only time will tell whether Philip Hammond, the Chancellor, decides to take action.