Retirement experts have long warned that the UK will face dramatic increases in its state pension age over the next few decades. They propose that it might reach 71 at the peak. The state pension age is already 66, rising to 67. The government is already committed to increasing it to 67 gradually between May 2026 and March 2028. In addition, according to forecasts, the number would then increase again to 68 in 2044. These changes result from increasing life expectancy and decreasing fertility that are putting pressure on public finances.
The Intergenerational Foundation, a think tank focused on demographic trends, emphasizes the necessity of adjusting the pension age in response to these economic pressures. To this end, Les Mayhew, the associate head of global research at the International Longevity Centre, makes an important reminder. To maintain the current number of workers per state pensioner, we should probably be increasing the pension age to at least 70, if not 71.
“In the UK, state pension age would need to be 70 or 71 compared with 66 now, to maintain the status quo of the number of workers per state pensioner.” – Les Mayhew
New analysis indicates that people born after April 1970 may end up having to work until 71. This unusual delay may jeopardize their future pension eligibility. This possible change has opened up a larger conversation about what such a move might mean for middle-aged workers as they face increased fiscal challenges.
The financial landscape is stark. The cost of state pensions and accompanied benefits are estimated to increase by £45 billion by 2050. Meanwhile, demands on health and social care are set to soar by £105 billion. Policy matters aside from their shocking size, these figures raise important questions about sustainability and fairness in the pension system.
Jonathan Cribb, associate director at the Institute for Fiscal Studies, shares his fears. He would agree with us that we can’t just raise the pension age without doing some key other reforms.
“Increasing the pension age without addressing other cost-saving measures is not realistic or equitable.” – Jonathan Cribb
As David Finch, the assistant director at the Health Foundation, recently noted this is an important concern. He cautions that raising the state pension age would compound challenges for people developing health problems. In the process, he argues that any increase needs to include support mechanisms. This is especially important for workers who may have difficulty fulfilling new mandates due to health-related impediments.
“The government should provide more support for people already out of work due to health issues.” – David Finch
As it stands, only 50% of adults in England and Wales remain disability-free and able to work by age 70. This staggering statistic highlights the need to center health disparities when it comes to conversations around retirement age. Finch advocates for employers to adapt job roles and maintain communication with employees on sick leave as a proactive measure.
Angus Hanton, co-founder of the Intergenerational Foundation, sums up his expertise on pension age. He does think it should be more aligned to life expectancy and the rigors of various occupations. He has consistently proposed that Americans over 60 be expected to pay for their additional, healthier years in retirement. After all, they fought hard to protect their golden years under state-funded generosity.
“The over-60s should finance their own extra retirement years since they have received such generous treatment from the state,” – Angus Hanton
Hanton further argues that funds raised through these changes could be redirected towards initiatives aimed at improving health outcomes for younger generations. While costly in the near term, this investment would save future economic costs as these people age.
Not all experts are in favor of increasing the state pension age. Andrew Scott makes the case that this is a dangerous precedent to pursue.
“Increasing the state pension age would be a terrible policy – a really bad way of attempting to make people more productive.” – Andrew Scott
The debate continues as stakeholders consider not only how to balance the financial realities of pensions but how to ensure equity and fairness across different demographics. This proposed shift would unfairly result in a lopsided effect. The consequences would fall much harder on poorer people, who are likely to have shorter life expectancies and already face a greater burden of health problems.