The UK retirement age is set to rise to 68 before the end of the 2030s, reports claim.
Millions born in the 1970s and later could be told they must work for longer as early as the chancellor’s March budget. Ministers want to raise the state pension age to 68 several years earlier than planned in a “big bazooka” bid to raise billions for the Treasury.
Under current legislation, the retirement age is set to rise to 67 in four to six years’ time, and then to 68 by 2046, although the government’s stated plan is for the latter to happen by 2039. It is claimed that relevant ministers and officials in each of this year’s three Conservative governments led by Boris Johnson, Liz Truss and now Rishi Sunak have been inclined to bring that date further forward.
According to The Sun, chancellor Jeremy Hunt and prime minister Rishi Sunak were last night warned they were “playing with fire” if the change came before the next general election. The move would bring billions for the UK’s struggling finances.
It was also claimed that former prime minister Liz Truss believed the move was a “silver bullet” and was initially minded to include it in her and then-chancellor Kwasi Kwarteng’s disastrous mini-Budget – which has since sparked alarm within government about the need to reassure investors of the UK’s fiscal responsibility.
What does the potential pension rise mean?
The current retirement age is 66-years-old for men and women but this figure has changed in the past, increasing from 65-years-old in 2018.
UK workers entering retirement receive a state pension from the government calculated based on their National Insurance contributions across their working life under the pre-2016 system which gives workers a “starting amount”.
If a worker’s starting amount is less than the full amount of the new state pension (£185.15 per week) workers may be able to build up a higher level of new state pension through contributions and credits made between 6 April 2016 and when the state pension age is reached.
Pensioners can continue working after retirement but the state pension is taxable so any additional earnings will affect how much a person receives.
Raising the age workers have to wait to begin receiving their pensions means people will have to work longer, as a result saving billions for the government. Sir Steve Webb, the David Cameron-era pensions secretary who is now a partner at LCP told said that “it is tempting for the Treasury to see increases in state pension ages as ‘easy money’”.
Even raising the pension age just one year earlier than currently planned could raise more than £9bn for the Treasury, with some £8bn saved in pension payments and an additional £1.3bn taken in taxes on extra earnings, pensions consultancy LCP told the paper.
Could the move be stopped?
According to reports, Jeremy Hunt is facing opposition from work and pensions boss Mel Stride, who is pushing for a 2042 pensions age increaase - arguing that predicted increases in life expectancy have failed to materialise.
A government source told The Sun: “There is a real risk that more people will die before they reach retirement and can draw their pensions, given the change in life expectancy projections since 2017 if we were to bring the state pension age increase too far forward.
“That would be especially true of people in the most deprived areas of the country where life expectancy is already lower.”
In France, hundreds of thousands took part in rallies across the country against unpopular pension reforms that will raise the country’s retirement age from 62-years-old to 64-years-old. French president Emmanuel Macron vowed to press ahead with the move but will face waves of civil unrest in the process.