Labour to Review UK State Pension Age Early
Labour has announced a review into the state pension age three years early, opening the door for it to be raised. Liz Kendall, the Work and Pensions Secretary, announced the next statutory government review into the retirement age as she launched a new pension commission on Monday.
Ms Kendall said she was “under no illusions” about how difficult it would be to map out plans for pensions for the coming decades amid cost of living pressures.
She said: “Many workers are more concerned about putting food on the table and keeping a roof over their heads than saving for a retirement that seems a long way away, and many businesses face huge challenges in keeping profitable and flexible in an increasingly uncertain world.”
The state pension age is currently 66 and is already poised to rise to 67 between 2026 and 2028.
The launch of the review into the state pension age comes three years ahead of schedule. The Government is required to review the state pension age every six years, with the most recent one occurring in 2023.
Ms Kendall warned that almost half of working-age adults are not putting any money into a private pension. Ministers will attempt to shake up the UK’s savings rules in an effort to encourage people to save more for retirement.
A three-member taskforce, led by trade unionist and Labour peer Baroness Drake, will “tackle the barriers that stop too many saving in the first place”, Ms Kendall said.
It comes as the UK grapples with the economic impact of an ageing population and the increasing financial pressure of the state pension on the public purse.
Currently, the state pension age is set to rise to 68 by the mid-2040s. However, a review could lead to this being brought forward. Any increase to the state pension age would be politically unpopular and would be likely to provoke a backlash from older workers due to retire in the coming decade.
Protests have erupted across Europe in recent years as countries including France and Spain increase the minimum legal retirement age.
Damon Hopkins of financial adviser Broadstone, said: “We would not be surprised to see an acceleration applied to the increase of the state pension age.
“The combination of an ageing population and the huge fiscal cost of the state pension would suggest that a change is inevitable. A lower or later state pension would, of course, double down the need for reform in the private savings landscape.”
Jeremy Hunt shelved plans for a proposed increase in the state pension age as chancellor in 2023, as a slump in life expectancy left ministers struggling to justify a rise.
The review comes amid mounting concern about the sustainability of the state pension system. The Office for Budget Responsibility (OBR) warned about the rising costs of the triple lock earlier this month.
The fiscal watchdog said that guaranteeing the state payment rises by the highest of earnings, inflation or 2.5pc would cost an extra £15.5bn a year by the next election, compared to if payments only rose in line with earnings.
The review comes at a time when relations between the Government and older Britons are already strained, following an about-turn on winter fuel payments.
Rachel Reeves, the Chancellor, faced fierce backlash after she scrapped universal winter fuel payments in July last year in a bid to save the Treasury £1.5bn a year. Last month, Ms Reeves reversed her decision and announced that pensioners with incomes of less than £35,000 a year would be eligible for the benefit.