The glaring problem with increasing the state pension age

The state pension age has been gradually raised by successive governments to reflect the fact that we are all living longer and to help reduce the burden of pension costs to the public purse.

But now leaks suggest they are planning to shift it to the age of 68 by the 2030s, affecting millions of people with very little notice.

And they’re doing this despite evidence that longevity is now starting to fall for the first time since 1900.

Campaigners say the move will plunge soon-to-be retirees into “misery and poverty”. So what’s going on?

Yahoo News UK explains in 10 points

Why are people talking about this now? Rumours emanating from inside the Treasury suggest that the government is preparing to raise the state pension age to 68 earlier than planned, perhaps as soon as 2035. According to some experts, workers aged 57 could lose out on £13,594, rising to £16,902 for workers aged 46. Someone with a £100,000 pension pot who retires at 67 will see their money running out two years earlier.

When will we be told? The government must publish the results of its latest review of pension age by 7 May, but leaks from Whitehall indicate that Jeremy Hunt is planning to announce the move as part of his budget statement on 15 March.

Does it really matter as life expectancy is increasing? It isn’t, anymore. Despite a rapid rise of over a decade between 1980 and 2016, in the last half decade, life expectancy has started to fall. It now stands at 79.0 years for men and 82.9 years for women.

Isn’t that just because of the pandemic? No; the trend started before the global outbreak of COVID-19. Analysts say it may be in part because of the impact of austerity on public health, with the largest effect being on the health of the most vulnerable people, such as those living in poverty.

It’s not only length of life that’s important. Inequalities are even greater for healthy life expectancy - the number of years you are expected to be fit and well. According to The King’s Fund, people living in the most deprived areas spend around a third of their lives in poor health while the richest get two decades longer of good health.

Why does it matter where you live? Although healthy life expectancy is also decreasing for everyone, it is lower in more deprived areas. For example, women in Oxfordshire expect to reach 69 in good health, but women living in County Durham may no longer live well after the age of 58 - a decade earlier than the new pension age.

How are people reacting to the news? Campaigners say the shift will put millions of people at risk. More than 1 million people aged 50 to 64 are already too ill to work. The charity Age UK said the move “will condemn millions to a miserable and impoverished run-up to retirement – and often beyond, too".

What about the cost of living? Rising mortgage interest rates and soaring food and energy prices are making it difficult for working people born in the 1970s and later to save into pensions, meaning they will need to rely on the state pension to retire. This week's interest rate rise will only exacerbate this.

Why does housing matter? Most people who rent will need to keep working until state pension age to cover their housing costs. But homeowners who have paid off their mortgage may be able to do so earlier - particularly if they already come from a wealthy background.

What does it mean for the government? Pensions expert Tom Selby, head of retirement policy at AJ Bell, said the government risked “electoral oblivion” with these plans - although as the Conservatives already trail by 21 points in the polls, that’s unlikely to stop the policy being introduced.