Government initiates pension age reassessment - potential for quicker increases in the future?
UK Announces Third State Pension Age Review
The UK government has launched the third State Pension Age Review, a comprehensive evaluation aimed at determining whether and when to increase the pension age further. The review, mandated by the Pension Act 2014, is conducted every six years to ensure the state pension system remains sustainable and fair for all generations.
The review is guided by two independent expert reports: one led by Dr. Suzy Morrissey, deputy director of the Pensions Policy Institute, and the other by the Government Actuary’s Department. These reports assess aspects such as the merits of linking state pension age increases directly to life expectancy changes, the fairness between generations, and how pension age policy contributes to the long-term sustainability of state pensions.
The review will consider several key factors:
- Whether the existing timetable for raising the state pension age is appropriate. Currently, the state pension age is 66, rising to 67 in 2028, and scheduled to rise to 68 between 2044 and 2046.
- The economic and social impacts of pension age changes, including the adequacy of pension savings, especially among vulnerable groups such as the self-employed.
- How to address the sustainability challenges posed by increasing life expectancy and demographic changes, ensuring the pension system remains affordable while fair for all generations.
The review may recommend further age increases, such as to 69 or even 70, to balance financial sustainability of the pension system against fairness and practical considerations for workers planning their retirement. However, it's important to note that the government is not obligated to accept the review's recommendations regarding the state pension age.
The launch of the State Pension Age Review has been welcomed by Damon Hopkins, head of DC workplace savings at the consultancy Broadstone, who considers it a "necessary step" in addressing the challenges posed by an ageing population and the fiscal cost of the state pension.
The review will also consider the impact of previous changes to state pension age, fiscal costs, and the effects on current taxpayers and those who may rely on the state pension as their primary source of income. It's crucial that the review carefully considers the impact that raising the age further could have on millions of savers and how to help people engage with their pension options.
In addition to the State Pension Age Review, the government has revived the Pensions Commission to address the retirement crisis, particularly focusing on improving retirement incomes for lower-income groups and tackling the barriers that stop too many from saving for retirement.
The review is expected to conclude around 2029, informing future government policy on state pension age. As Kirsty Anderson, retirement specialist at the wealth manager Quilter, notes, the review will be "politically sensitive," and any acceleration of the rise to 68 must be justified with updated life expectancy data and a clear understanding of regional disparities.
Sources: 1. BBC News 2. The Guardian 3. Pensions Policy Institute 4. Financial Times 5. The Pensions Regulator
- The third State Pension Age Review in the UK is a crucial evaluation aimed at determining if and when the pension age should be raised further to maintain the system's sustainability and fairness across generations.
- The review will examine factors such as the existing timetable for raising the state pension age, economic and social impacts of pension age changes, and the adequacy of personal savings, especially among vulnerable groups.
- The results of the review could recommend further age increases to balance the financial sustainability of the pension system against fairness and practical concerns for workers planning retirement.
- The State Pension Age Review is politically sensitive, and any acceleration of the rise to 68 must be justified with updated life expectancy data and a clear understanding of regional disparities, as noted by retirement specialist Kirsty Anderson.
