An age rise of the state pension to 68 could be implemented sooner than expected as the government attempts to curb spending on a growing ageing population. Over half a million people in the UK are over 90-year-olds old and around 11 million are aged 65 or over – with the disproportionate rise of older people expected to increase in the coming decades, despite life expectancy improvements stalling post-COVID.
The number of people celebrating their 100th birthday has also doubled in the last two decades, according to Tom Selby, director of public policy at AJ Bell, who warned the trend could have consequences for the future of the state pension. The ageing UK population has been attributed to a range of factors, including declining fertility rates and improvements in healthcare and nutrition. But the changing demographics have already ratcheted up state pension costs to around £125 billion, Mr Selby said, and are likely to continue placing “an ever greater burden on taxpayers”.
It could provoke the government to accelerate a rise of the state pension age, he added, with plans already in place to increase it to 67 by 2028 and 68 by 2046.
He wrote in IFA Magazine: “There is every chance the timetable to 68 will need to be brought forward at some stage – particularly if public finances remain in the doldrums. However, the universal nature of the state pension means doing this will inevitably hit the poorest, hardest.”
Spending on the country’s ageing population also includes the “triple lock“, which guarantees that pensions will rise each year by either the annual rate of inflation, average earnings growth or 2.5%, depending on what is highest.
However, Mr Selby cautioned that the scheme – while “useful to successive governments politically” – could come under consideration because it “remains potentially very expensive and without a clear end goal”. Welfare spending on pensioners, also including housing benefits, pension credit and winter fuel payments, is forecast to rise by 29% between 2023/24 and 2029/30.
In a bid to bring costs down to help tackle a £22 billion “black hole” in the public finances, Chancellor Rachel Reeves has already cut winter fuel payments for around 10 million pensioners, prompting an outcry on behalf of vulnerable groups that would likely be replicated in any similar measures.
A fast-tracked increase of the state pension age could force workers to stay in their jobs for years longer than they expected, and would likely be unpopular with anyone who has firm retirement plans. But Mr Selby stressed that the government may have no choice but to take some form of action, and simply grit their teeth and bear the backlash.
He said: “Revisiting either the state pension age or triple-lock will not be something the current administration will want to do, particularly after the fallout from the decision to means-test the winter fuel payment.
“But at some stage, a government will need to face up to this challenge and come to a decision on what the state pension should be worth, and for how long people should receive it.”
