What is current retirement age?
Previously, the state pension age was 65 for men and 60 for women.
However the Government equalised the retirement age to 65 for both sexes.
It has since increased to 66 for men and women and is due to move again, to 67, by 2028. A further increase to 68 by 2046 is set in legislation but the Government has proposed bringing this forward to between 2037 and 2039 amid concerns about the affordability of the state pension for an ageing population.
A 2017 Department for Work and Pensions (DWP) report explains the rationale behind state pension age increases: “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. This is important – if we do this successfully the prize is ensuring prosperity and wellbeing for all in later life, and delivering sustainable public services that support this.”
Acknowledging that such a move will have consequences for society, the Government is due to publish a second report into bringing forward the state pension age to 68 in May. Any proposal would need to be approved by Parliament.
People who qualify for the full new state pension – with 35 years of national insurance contributions – get £185.15 a week, or £9,600 a year.
The state pension is increased every year under the triple lock policy which boosts the rate by whichever is the highest of inflation, wages or 2.5 per cent. In April the full rate is set to rise to £203.85 a month.
What might be announced in the Budget?
There is speculation that accelerating the state pension age to 68 in the 2030s could be announced in Chancellor Jeremy Hunt’s Budget on 15 March. This would be two months earlier that the Government report.
Earlier this week, Work and Pensions Secretary Mel Stride declined to comment on the Government’s thinking ahead of the budget.
He said the Government would take into account life expectancy, regional differences, spending and fairness between generations when making a decision.
Helen Morrissey, head of retirement analysis at financial services firm Hargreaves Lansdown, said “accelerating the shift to 68 in state pension age will be a tricky balancing act”.
“Increasing longevity has massively increased the cost of providing the state pension and this has been used as the rationale behind previous rises. However, there are signs now these increases in longevity are slowing and so accelerating the increase to 68 will seem harder to justify, especially given huge differences in longevity at regional levels which show that not everyone can expect to live long enough to receive it.
“We also need to think about the issue of healthy life expectancy and the huge numbers of people who are simply unable to keep working into their late 60s. This could cause them severe financial hardship if they don’t have adequate pension savings to support their income until they hit state pension age. People need certainty as to when they receive their state pension so they can plan ahead and an acceleration in the shift to 68 could really undermine people’s financial planning.”
The DWP said: “The Government is required by law to regularly review the state pension age, the second of which needs to be published by 7 May.”