Planned increases to the state pension age to 67 and 68 from the Department for Work and Pensions (DWP) could be “brought forward”, experts claim. The Government is expected to provide an update regarding the retirement age threshold later this year.
As it stands, the state pension age is 66 years old with the DWP scheduled to hike the threshold to 67 sometime between 2026 and 2028. Another rise to 68 is expected to take place between 2044 and 2046.
Under the previous Conservative Government, a review was conducted in 2023 examining whether future state pension age increases should be accelerated. In March of that year, ministers indicated there would be a review within two years of next Parliament to explore raising the age to 68.
Mel Stride, the current shadow chancellor and former pensions secretary, said at the time: “It’s essential the state pension remains sustainable and fair across the generations.
“Our balanced approach will help achieve this and ensure we continue to provide security and dignity in retirement for millions of people across the country.” The current Labour Government has pledged to keep the triple lock on payments with Chancellor Rachel Reeves set to present the Spring Budget on March 26.
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Under the The Pensions Act 2014, ministers are obligated to take the “appropriate time” to look into factors which could affect retiree finances and public spending in the years ahead.
These include life expectancy and population projections updated with 2021 Census data, demographic trends, the wider economy and the impact on the country’s labour market.
Fiona Peake, a personal finance expert at brokerage Ocean Finance, outlined why already confirmed increases to the state pension could be “brought forward” by the Government
She explained: “With part two of the pensions review approaching, we’re likely to see fresh discussion around the state pension age and whether changes are needed to keep the system sustainable.”
“The Government has previously stated there would be a review within two years of this Parliament about the planned rise in the state pension age to 68, so we could be looking at an announcement around the Spring Budget.
“Whether or not the state pension age increase from 67 to 68 is brought forward will depend on a balance of affordability and fairness. Life expectancy trends, workforce participation, and public finances will all come into play.
“If we’re living longer and working later, it might seem logical to shift the state pension age forward, but such changes can feel deeply unfair to those in physically demanding jobs or with health issues, who may struggle to work into their late 60s.
“Employers, the Government, and organisations like the Pension Advisory Service all need to make sure these changes are well-communicated. Otherwise, people could face a nasty shock when they realise they’ll need to wait longer than expected to access their state pension.”
Last year, former Conservative MP Lord Willetts shared there was “precedent and evidence” which suggests the retirement benefit’s age threshold could be raised sooner than previously expected.
Speaking to the i, Willetts asserted that the Government is set to raise the state pension age to 67 by the next Parliament while emphasising a “further increase could be sped up”.
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Under current projections, the UK Government is forecast to spend £137.5billion on the state pension in 2024–2025. This is part of the £165.9 billion that will be spent on benefits for pensioners in Great Britain during that time.
During the 2023–2024 tax year, the Government spent £132billion on the state pension, Pension Credit, and Winter Fuel Payment. This was 5.1 per cent of the national income.
In her Autumn Budget, Chancellor Rachel Reeves announced controversial fiscal policies impacting pensioners and those preparing for retirement. Reeves confirmed the Winter Fuel Payment would be means-tested. As a result, pensioners will need to claim means-tested DWP support to get the up to £300 in energy bill support.
Furthermore, the Chancellor revealed that pension pots will now be considered as part of an individual’s estate once the pass away. Due to this, pensions are liable to pay the 40 per cent tax charge levied by inheritance tax (IHT).
