Accelerated state pension age rise reportedly delayed
The Government has reportedly pushed back controversial plans to raise the state pension age faster than initially expected.
Under current plans, the state pension age is set to rise from 66 to 67 by 2028, before it was expected to rise to 68 between the years 2044 and 2046.
However, reports suggested the Government was planning to accelerate the state pension age rise to 68 by mid-2030s instead of by 2044 to 2046 amid concerns over the aging population and falling birth rates. This would impact millions of people currently in their 50s.
In January, a report in The Sun suggested the Chancellor could announce this measure as early as the Spring Budget.
While a number of pension reforms were announced in last week’s Budget, there was no mention of changes to the state pension age.
But, according to the Financial Times, ministers are reportedly planning to delay the lift to the UK state pension age amid warnings it could “provoke a backlash from middle-aged voters”.
According to officials, the plan was due to be confirmed in May, but the decision has now been pushed beyond next year’s election.
Riots are already taking place in France over President Emmanuel Macron’s decision to bypass Parliament and push through a major pension reform in raising the minimum retirement age from 62 to 64.
And here in the UK, there has been criticism over the Government’s surprise move to abolish the pension lifetime allowance while expecting Brits to work longer.
Further, at the time of the last pension age review, the improvement in life expectancy at retirement didn’t materialise, and instead has fallen.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Gloomier mortality projections have forced a rethink on the state pension age, which means that it could stay lower for longer.”
‘Nail in the coffin for Conservatives’
While the increase in the state pension age in the UK could raise tens of billions of pounds in much needed revenue, analysts suggested it would be “playing with political fire”.
Back in January, Tom Selby, head of retirement policy at AJ Bell, said: “Even if the Treasury makes the argument that this shift is necessary to steady the nation’s finances and ensure the state pension remains sustainable over the long term, telling millions of people they will have to wait longer for their pension might prove the final nail in the coffin of the Conservatives’ hopes of winning the next general election.”
And now, experts say the reports of a delay “will be a big relief to many”.
Steven Cameron, pensions director at Aegon, said: “Having certainty and stability around when your state pension will commence is essential for future planning and official confirmation from the Government would be most welcome.”
Pension triple lock review?
Cameron added: “From 6 April, the state pension triple lock will deliver a 10.1% increase for state pensioners. While just falling short of the 10.4% inflation rate announced today, it is still good news for state pensioners. However, it comes at a high cost which is met from the National Insurance contributions of today’s workers. Many believed that to sustain funding, the Government would increase the state pension age sooner. However, life expectancy at retirement is now lower than previously assumed, which takes some pressure off the future cost of state pensions and avoids a controversial state pension age hike in the run-up to a general election.”
Jon Greer, head of retirement policy at Quilter, said: “The Tories understandably look determined to try and claw back some public favour amongst their core voters by delaying its widely anticipated state pension age increase. Any increase would have proven incredibly unpopular whichever way you cut it.”
However, he added that for those worried that this delay is a short-term solution, there are rules stating there should be a minimum of 10 years’ notice for individuals affected by changes to the state pension age so that they can adequately plan.
Greer also said “we may see more of these crowd-pleasing policies as we head towards the general election”.
However, he added that the delay to increasing the age “puts the state pension’s long-term sustainability into the spotlight” and “this could be the Government simply kicking an inevitability down the road for the next party who take Government to deal with”.
It could mean a review of the state pension triple lock, with it being less generous in the years to come or higher taxes to fund the big state pension bill.