The state pension age would need to rise to 71 by 2050, or even earlier, to help balance the number of workers financially supporting pensioners, a new report has revealed.
The UK pension age is currently 66 and set to rise to 67 between May 2026 and March 2028, with a further increase to 68 expected from 2044.
However, data from the the International Longevity Centre’s Healthy Ageing and Prevention Index has suggested that this will not be sufficient, with the longer life expectancy, ill health and falling birth rates placing extra pressure on the state pension.
According to the think tank, at pension age 65, a ratio of 20% equates to five workers per retiree but a ratio of 50%, which is projected for at least 20 countries including the UK by 2050, means just one worker per retiree.
In the UK, the state pension age would need to be 70 or 71 compared with 66 now to maintain the status quo of the constant number of workers per state pensioner. This may need to happen as early as 2040, the think tank warned, predominantly due to ill health forcing workers to exit the workforce before they reach state pension age.
In 2023, the government made the decision to delay its widely anticipated state pension age increase until after the next general election, with the government citing falling life expectancy rates at the time. However, data from the ILC suggests that while the stall in life expectancy has temporarily eased the pressure for increases beyond 67 after 2027, longer term pressure will mount.
Separate figures from the Office for National Statistics released last week show that the number of people aged 85 and over could grow in the next 15 years from 1.6 million to 2.6 million.
Jon Greer, head of retirement policy at Quilter, said of the latest ILC report: “This report puts the state pension’s long term sustainability into the spotlight and the government’s decision to delay last year may mean it has simply kicked an inevitability down the road for the next party to take government to deal with. The IFS previously suggested that a one-year increase in the state pension age in the late 2030s would likely save around £8-9 billion a year. However, delaying the planned rise in the state pension age to 68 by seven years would cost at least £50 billion.
“Any increase would prove incredibly unpopular so the government is highly unlikely to backtrack on its decision to wait until after the general election. However, if this is the case, it may be left with the choice of reviewing the triple lock and replacing it with a less generous uprating mechanism and/or accepting that funding for state pensions is going to increase through higher taxes or national insurance.”
Greer said that while the framework for reviewing state pension age sets out that there should be a minimum of 10 years’ notice for individuals affected by the changes so that they can adequately plan, upping pension contributions now can help bridge the gap further on.
Meanwhile, Aegon has called upon the UK’s political parties to detail their plans over the future state of the state pension, stating that the latest findings will be “concerning” for millions of people.
Kate Smith, head of pensions at Aegon, said: “This report, published in an election year, highlights the need for the political parties to detail their plans for state pensions ahead of the UK general election. This is too important an issue to be kicked into the long grass. People need to know where they stand and what this means for their later life, giving them plenty of time to adjust their working and savings plans.
“Raising the state pension age feels like a very blunt instrument – and would likely penalise those most in need.”
