The government plans to consult on a further extension of the state pension age, with indications it will pull back the start date for the 68 year retirement mark
The review will consider whether the rules around pensionable age are appropriate, based on the latest life expectancy data and other evidence, and will report back by May 2022.
State pension age is currently 66 and two further increases are currently set out in legislation: a rise to 67 for those born on or after April 1960; and a rise to 68 between 2044 and 2046 for those born on or after April 1977. However, it now looks increasingly likely that the start date for the increase to 68 years will be brought forward.
The first review of state pension age in 2017 concluded that the next review should consider whether the increase to age 68 should be brought forward to 2037-39, seven years earlier than originally planned. It is now increasingly likely that people will be expected to work longer
This review will consider a range of evidence, including the implications of the latest life expectancy data; and it will produce an assessment of the costs of an ageing population and future state pension expenditure.
Two independent reports have been commissioned – one from the government actuary’s department to look at life expectancy projections. The second is to be led by Baroness Neville-Rolfe, which will also consider what needs to be considered when setting the state pension age.
The government is also reviewing the current age limit for pension drawdown from private pensions and is likely to raise the age to 57 years from the current 55-year limit, meaning that there will be later access to pension pots.
The government has confirmed that the state pension will rise by 2.5% from April 2022, breaking the pension lock as a result of the impact of the pandemic
In a busy day in parliament, the minister of state told MPs that this would be a one-year intervention and that the normal increase in line with average earnings increase would be reinstated from the 2023-24 tax year.
As happened last year, once again the state pension will rise at a fixed rate below the RPI rate of inflation.
Secretary of state for work and pensions, Thérèse Coffey MP, said: ‘[Last year], we legislated to set aside the earnings link, allowing me to award an uprating of 2.5% as this was higher than inflation. If we had not done this, state pension would have been frozen.
‘Thanks to our vaccination programme which started with the eldest and most vulnerable in our society, we have seen that as the economy and businesses have reopened and millions have moved off furlough and returned to work, the labour market has shown strong signs of recovery and earnings have risen at an unprecedented rate and we face a distorted reflection of earnings growth.
‘So tomorrow, I will introduce the Social Security (Up-rating of Benefits) Bill. For 2022/23 only, it will ensure the basic and new state pensions increase by 2.5% or in line with inflation, which is expected to be the higher figure this year. And as happened last year, it will again set aside the earnings element for 2022/23, before being restored for the remainder of this parliament.’
In addition to those receiving basic and new state pensions, this will apply to those receiving standard minimum guarantee in pension credit and widows’ and widowers’ benefits in industrial death benefit.
Coffey added: ‘Since 2010, the full yearly basic state pension has increased by over £2,050 in cash terms. There are also 200,000 fewer pensioners in absolute poverty – both before and after housing costs – than in 2009/10.’