The State Pension age is already set to rise in the coming years, but a pensions expert has warned that it may need to increase even further in order to remain sustainable
The State Pension age is set to rise from next year, currently standing at 66 for both men and women. The age will gradually increase to 67 between 2026 and 2028 for those born after April 1960.
The transition process is then expected to be completed for everyone by March 2028. The planned change to the official age of retirement has been in legislation since 2014, with a further rise from 67 to 68, which is set to be implemented between 2044 and 2046.
A further rise to 68 is expected to be brought forward from 2046. An industry expert has warned that the UK state pension age may need to rise to 80 without significant reforms, as the current system is becoming unaffordable. In other related news, state pensioners could lose DWP payments after ‘unfair’ £10,000 rule.
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The Independent reports The Office for Budget Responsibility projects the annual cost of the state pension could reach £200bn by 2073, representing 7.7-8.4% of GDP (Gross Domestic Product) by the 2070s, as shown in a new report.
Pensions expert Jack Carmichael suggests the cost could be even higher than official projections, potentially necessitating a state pension age of 80 to maintain affordability. Mr Carmichael estimated the increase could be as much as £8bn a year higher, reports the Liverpool Echo.
A report from last month warned that the combination of an ageing population and the triple lock could significantly hike long-term costs. Mr Carmichael stated that the model still underestimates the risk of increasing life expectancy, and both projections would necessitate either a rise in the state pension age or National Insurance.
The State Pension is a regular payment from the government that most people can claim when they reach State Pension age. The amount received varies for everyone and depends on your National Insurance record.
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The UK Government has announced a review of the state pension, coinciding with the revival of the landmark Pensions Commission. This will examine: “Why tomorrow’s pensioners are on track to be poorer than today’s and make recommendations for change.”
There is growing concern that future retirees will face lower incomes than those retiring today. The Government is obligated to conduct a review into the state pension age, currently 66, every six years. The last one concluded in 2023.
Many working-age adults (45%) are not saving anything at all into a pension, with lower earners, the self-employed and some ethnic minorities particularly at risk. The relaunched Commission will investigate the complex barriers preventing people from saving enough for retirement, with its final report due in 2027.
Work and Pensions Secretary Liz Kendall stated: “People deserve to know that they will have a decent income in retirement – with all the security, dignity and freedom that brings. But the truth is, that is not the reality facing many people, especially if you’re low paid, or self-employed.”
“The Pensions Commission laid the groundwork, and now, two decades later, we are reviving it to tackle the barriers that stop too many saving in the first place.” In addition to the Commission, the Government has also initiated the State Pension Age Review as mandated by law, commissioning two independent reports for the Government to consider when determining the State Pension age for future decades.