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State pension age could rise faster than expected, say experts State pension age could rise faster than expected, say experts
(about 2 hours later)
Millions more people of working age may have to wait until their mid-70s to retire after the government launched a fresh review of the state pension age, Labour and financial experts have warned. Millions more working-age people may have to wait until their 70s to retire after the government launched an official review of the state pension age, Labour and financial experts warned.
Those under the age of about 55 could be affected by any changes recommended by the review, which will rethink what the state retirement age should be after April 2028. This is the point when the age of retirement will have hit 67 for both men and women. The exercise will consider whether to change the state retirement age from April 2028, the point at which it will have reached 67 for men and women, potentially affecting people under the age of about 55.
The state pension age has already been going up on a gradual basis from its longstanding level of 60 for women until it reaches the male level of 65. From 2018, it will rise on a phased basis for men and women until it hits John Cridland, the former director general of the CBI, was appointed to act as the independent reviewer of the pension age and will look at whether the pension age should continue to be linked to rising life expectancy.
The new review, led by John Cridland, the former head of the CBI business group, suggests this timetable could be speeded up even further so young and middle-aged workers will have to wait even longer than to retire. The Office for Budget Responsibility has forecast that on current trajectories of life expectancy, the rate could reach 70 by the mid-2060s. The Office for Budget Responsibility has already forecast that on current trajectories of life expectancy, the state pensionable age could reach 70 by the mid-2060s, but Labour and financial experts have warned that it could come sooner than expected.
As part of the review, Cridland will look at whether the “current system of a universal state pension age” is right, and consider whether should in future linked to life expectancy. This suggests the retirement age could continue to rise even if longevity stagnates or declines. It is due to report in time for any changes to be considered by George Osborne, the chancellor, by May 2017.
The review was announced on the same day as it emerged that Osborne is likely to abandon plans to bring in flat rate pension relief of as low as 25% because it would be too politically difficult.
Many Tory MPs would be fiercely opposed to the plans that would give lower earners more relief but mean higher earners having to pay significantly more, potentially creating a distracting new row over the at a time of Conservative tensions over the EU.
However, David Gauke, the financial secretary to the Treasury, suggested there still could be some changes in the budget, saying the government would seek to make sure “the costs of pensions tax relief are targeted in the right direction”
The Department of Work and Pensions is in charge of the review of the state pension age but any changes would almost certainly be looking to create savings for the Treasury as well.
Setting out the terms of the pension age review, the government said it wanted to “ensure that the state pension remains sustainable for generations to come” and set out its aims as achieving “affordability, fairness, and fuller working lives objectives”.
The announcement was met with anxiety by a number of charities and the Labour party, which raised concerns that the government could take the recommendations of the review and accelerate the changes.
Campaigners are currently pressing ministers to ease the pain of changes to the retirement age for some women in their mid-50s, who argue they have had insufficient warning that they will have to wait longer to get their state pensions.
Responding to the review, Owen Smith, the shadow work and pensions secretary, said: “People are right to worry that the terms of this review may suggest that the Tory government is set to speed up rises in the state pension age, throwing into chaos the retirement plans of millions of British workers.”
Paul Green, of retirement specialists Saga, also warned the pensions minister, Ros Altmann, a former director-general of the group, not to make the mistakes of the past.
“Reviews to the state pension age are understandably very emotive,” he said. “Whilst many people recognise the need to extend working lives for those that are able, there has been repeated criticism of the speed in which previous changes have been introduced.
“Many people, particularly women, had made plans for their retirement and felt that they weren’t notified of the changes early enough – leaving them with little to no time to make alternative plans to fund their retirement.”
He urged Lady Altmann to promise that any changes would not affect those within 10 years of their current expected retirement age, to allow people time to plan, and raised worries that breaking the link to life expectancy “potentially sounded alarm bells”.
Tom McPhail, the head of retirement policy at the financial services firm Hargreaves Lansdown, said: “We fully expect state pension ages to go up faster than currently planned, and those joining the workforce today are likely to find themselves waiting until their mid-70s to get a payout from the state system.Tom McPhail, the head of retirement policy at the financial services firm Hargreaves Lansdown, said: “We fully expect state pension ages to go up faster than currently planned, and those joining the workforce today are likely to find themselves waiting until their mid-70s to get a payout from the state system.
“This is simply a function of the big jumps we continue to see in life expectancy, which the state pension can’t hope to support without costs spiralling out of control.“This is simply a function of the big jumps we continue to see in life expectancy, which the state pension can’t hope to support without costs spiralling out of control.
“Whatever decisions they make, the government needs to make sure they communicate them very, very clearly so individuals can plan their retirement savings with some certainty about what they will get from the state, and when they will get it.”“Whatever decisions they make, the government needs to make sure they communicate them very, very clearly so individuals can plan their retirement savings with some certainty about what they will get from the state, and when they will get it.”
Caroline Abrahams, a director of Age UK, said the charity looked forward to contributing to the review and believed it was essential that further rises in the state pension age should not be based on life expectancy alone. The state pension age has already been going up on a gradual basis from its longstanding level of 60 for women until it reaches the male level of 65. From 2018, it will rise on a phased basis for men and women until equalising at 67.
Owen Smith, the shadow work and pensions secretary, said: “People are right to worry that the terms of this review may suggest that the Tory government is set to speed up rises in the state pension age, throwing into chaos the retirement plans of millions of British workers.”
Cridland said: “I am delighted to be the first independent reviewer of state pension age. I look forward to meeting many stakeholders, hearing the views of experts and the experience of organisations working in this area to help shape the review. I know how important this issue is, and will consider all the evidence to ensure that we have a state pension age fit for the future.”
The review is due to report in time for any changes to be considered by George Osborne by May 2017.
Caroline Abrahams, a director of Age UK, said the charity looked forward to contributing to the review and believed it was essential that further increases in to the state pension age should not be based on life expectancy alone.
“When reviewing the state pension age we would ask John Cridland to take into consideration health and employment opportunities, as well as giving people plenty of notice ahead of any change to their state pension age to avoid any surprises when it comes to retirement,” she said. “We know that many women were unaware of previous changes and now face sharp rises in their state pension age with little time to change their plans.”“When reviewing the state pension age we would ask John Cridland to take into consideration health and employment opportunities, as well as giving people plenty of notice ahead of any change to their state pension age to avoid any surprises when it comes to retirement,” she said. “We know that many women were unaware of previous changes and now face sharp rises in their state pension age with little time to change their plans.”
Altmann, who used to run Saga and was an independent pensions campaigner before being made a Tory minister, said: “As our society changes, it is only right that we continue to review state pension ages and take into account the relevant factors to make sure that the state pension is sustainable and affordable for future generations.” Pensions minister Ros Altmann said: “As our society changes, it is only right that we continue to review state pension ages and take into account the relevant factors to make sure that the state pension is sustainable and affordable for future generations.”
Paul Green, of retirement specialists Saga, said that Altmann, a former director-general of the group, must avoid the mistakes of the past.
“Reviews to the state pension age are understandably very emotive,” he said. “While many people recognise the need to extend working lives for those that are able, there has been repeated criticism of the speed in which previous changes have been introduced.
“Many people, particularly women, had made plans for their retirement and felt that they weren’t notified of the changes early enough – leaving them with little to no time to make alternative plans to fund their retirement.”
The review was announced on the same day as it emerged that Osborne is likely to abandon plans to bring in a flat rate pension relief of as low as 25% because it would be too politically difficult.
Many Tory MPs would be fiercely opposed to the plans that would give lower earners more relief but mean higher earners having to pay significantly more, potentially creating a distracting new row over the at a time of Conservative tensions over the EU.
However, David Gauke, the financial secretary to the Treasury, suggested there still could be some changes in the budget, saying the government would seek to make sure “the costs of pensions tax relief are targeted in the right direction”.
The Department for Work and Pensions is in charge of the review of the state pension age but any changes would almost certainly be looking to create savings for the Treasury as well.
Setting out the terms of the pension age review, the government said it wanted to “ensure that the state pension remains sustainable for generations to come” and set out its aims as achieving “affordability, fairness, and fuller working lives objectives”.
Campaigners are currently pressing ministers to ease the pain of changes to the retirement age for some women in their mid-50s, who argue they have had insufficient warning that they will have to wait longer to get their state pensions.