People in their forties may have to work to 69 or even 70 in the future if the Government is to stay within spending guidelines.
Former pensions minister Sir Steve Webb said the “draconian shift” was a “sting in the tale” of a review into pensions policy which paused a decision on rising the state pension age to 68 until after the next election.
The Government did not rule out making such a change.
The review by Baroness Neville Rolfe published on Wednesday recommended capping state spending on pensions at 6 per cent of GDP.
If implemented, this would raise the pension age from 68 to 69 between 2046 and 2048. Anyone born after 1979 would have a pension age of at least 69 under the Neville Rolfe plans.
Mr Webb welcomed the Government taking account of the slowdown in life expectancies in recent years but added: “There is a sting in the tail in the analysis which the Government has published today.
“If it adopts the idea of placing a cap on the share of national income spent on pensions, this would mean a rapid increase in pension ages, including a rise to 69 before the end of the 2040s.
“This would be a draconian shift in policy which would be likely to mean today’s younger workers facing a pension age of 70 or above”.
The first generation to work until they are 68 are currently set as those who are born on or after 5 April 1977 but in 2017 a government review had recommended including those born in the late 60s in the new retirement age.
Yesterday the work and pensions secretary, Mel Stride, confirmed the plan was being delayed and the pension age would not change until another review was completed.
“I plan for a further review to be undertaken within two years of the next parliament to consider the rise to age 68 again,” Mr Stride told the Commons, adding: “This will ensure that the Government is able to consider the latest information, including life expectancy and population projections.”
The decision to halt the planned change was prompted by a slowdown in life expectancy.
While increasing the first cohort of people to retire at 68 has been shelved, there will be no change to the legislated timetable, meaning that the pension age will still rise to 67 by 2028 and 68 by 2046 and there will be a fresh review two years into the new Parliament in 2026.
The review, which will take account of the 2021 census data and clearer information on the impact of the pandemic on long-term life expectancy, could in principle still recommend changes as soon as 2036.
Britain currently spends 4.8 percent of GDP on pensions, with the figure projected to soar to 8.1 per cent of GDP by 2071.
This week there have been angry demonstrations in France at President Macron’s proposals to raise the French retirement age to 64.
France currently spends 14 percent of its GDP on pensions, over three times that spent by Britain.
Shadow work and pensions secretary Jonathan Ashworth said stalling life expectancy rates are a “damning indictment” of the Government.
He said: “Today’s announcement that they are not going ahead with accelerating the state pension age is welcome, and it is the right one.
“But it is the clearest admission yet that a rising tide of poverty is dragging life expectancy down for so many, and stalling life expectancy, going backwards in some of the poorest communities, is a damning indictment of 13 years of failure which the minister should have acknowledged and apologised for today.”
The Institute for Fiscal Studies (IFS) has suggested that the cost to the Exchequer of not introducing a rise in the state pension age from 67 to 68 from the late 2030s could be around £8 billion to £9 billion per year.
Asked about the 6 per cent cap, a No10 spokesman said: “We will obviously look at that closely. We will look carefully at the data and evidence including the two independent reports to reach a decision.”