The State Pension age will increase much earlier than planned, according to a new move from the government. A review is now being carried out into the premature rise after the government previously said bringing forward an increase in the retirement age from 66 to 68 is "the fair thing to do."
Under the current legislation, the State Pension age would have increased to 68 between 2044 and 2046. But it will instead follow the recommendations in an independent review by John Cridland, former Director-General of the Confederation of British Industry (CBI), says the government.
The Cridland review says the pension age should go up to 68 seven years earlier than that, between 2037 and 2039. This is because of the impact of an increasing number of older people from the Baby Boomer generation (born 1945–65), along with a rise in life expectancy.
Latest projections from the Office for National Statistics (ONS) are that the number of people over State Pension age in the UK is expected to grow by one third, from 12.4 million to 16.9 million, by 2042. But at the same time, the number of working-age people, whose National Insurance contributions fund the State Pension, will start to go down.
A report by the government explains: "In 1948, when the modern State Pension was introduced, a 65-year-old could expect to live for a further 13½ years, or 23 per cent of their adult life, assuming adult life starts at 20. In 1995, when the first changes were enacted to equalise State Pension age, a 65-year-old could expect to live for 18½ years, or 29 per cent of their adult life. This had risen to around 21 years by 2007, or 32 per cent of their adult life, when further legislation was introduced to increase State Pension age.
"Increased longevity is a triumph of improved health and better living standards. But an ageing population also presents us with some profound challenges. It means that if we are to be fair to our children and ensure our society continues to be able to care properly for older people, we need to ensure that people spend on average the same proportion of time over State Pension age.
"The government intends to follow the recommendation John Cridland made in his independent review to increase the State Pension age from 67 to 68 in 2037–39, bringing it forward by seven years from its current legislated date of 2044–46. This is the fair thing to do. It is also the responsible course of action."
It says it will provide a minimum of 10 years’ notice for individuals affected by new changes to their State Pension age. Mr Cridland recommended this "to provide certainty for individuals and allow for ‘windows of stability’ where the impact of each change can be monitored and mitigations introduced if appropriate."
Pushing up the pension age to 68 in 2037-39 would save £74billion by 2045-46 compared to the current State Pension age timetable, the government has calculated.
The government says: "The alternatives for controlling costs of this magnitude would be to pay lower State Pensions, with an inevitable impact on pensioner poverty, or to ask the working generation to pay an ever-larger share of their income to support pensioners. Our timetable achieves the right balance.
"Because life expectancy is increasing, people affected by this rate will be spending longer on average in receipt of the State Pension than people have spent over the age of 65 over the last 25 years, and on average will receive more in State Pension over their retirement than previous generations."
The government will carry out its next State Pension age review by July 2023, which will confirm the proposed changes for the State Pension age increase to 68, reports BirminghamLive. The table below shows the planned increase in pension age.
How the changes affect you
So how will these changes affect when you can claim a pension? Here are the differences depending on when you were born.
Born on or before April 5, 1970 - No change to your State Pension age of 66 or 67, depending on your date of birth
Born between April 6, 1970 and April 5, 1978 - Your current State Pension age of 67 will increase to between 67 years 1 month and 68 years, depending on your date of birth
Born after April 6, 1978 - No change to your State Pension age of 68
You can get information on your State Pension, including pension age and what you'll receive, using the Goverment's State Pension age checker here but note that it is based on the existing legislation, not the changes mentioned here which are not yet law.
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