There have been media reports that the government will no longer
increase the state pension age from age 67 to 68 between 2037 and
2039, as had previously been announced in 2017. Under current
legislation, this would mean that it would instead rise between
2044 and 2046. In a report, published today, IFS researchers set
out some of the key considerations:
- Based on evidence from previous increases, delaying the
increase in the state pension age from 67 to 68, would mean
around 1 in 10 people would retire at age 67 rather than 68
between 2037 and 2044.
- Delaying the increase in the state pension age would cost the
Exchequer £8-9 billion for each year that it is delayed. This
means a seven-year delay would certainly cost the government more
than £50 billion over the seven years, and more likely more than
£60 billion. Most of this is simply due to paying the state
pension for less long.
- On the other hand, income poverty rates among 65 year olds
more than doubled, rising from 10% to 24%, when the state pension
age was raised from 65 to 66. The government should consider what
additional support should be provided to those on lower incomes,
and those in poor health, in their mid 60s when the state pension
age increases further;
- For people born in any given year, life expectancy has
fallen, particularly in the most recent set of projections by the
Office for National Statistics. For example, a man born in 1971
(and who turned 50 in 2021) is now expected to live to 83.9. In
2016, which is the information used in the first independent
review of the state pension age, ONS forecast his life expectancy
at age 50 to be 85.6. The equivalent life expectancies at age 50
for a woman born in 1971 was 88.1 back in 2016, but is now only
86.7.
- These falls in life expectancy certainly provides a rationale
for not increasing it as swiftly as previously intended.
- However, it is still the case that life expectancies are
rising when comparing people born more recently with those born
in earlier generations. Even with a rise in the state pension age
to 68, a man born in 1980 (who makes it to age 50) would expect
to receive a state pension for 17 years, the same as for a man
born in 1950 (who had a state pension age of 65).
- Equalisation of state pension ages for men and women has
meant a bigger rise in the female state pension age, but a woman
born in 1980 (who makes it to 50) facing a state pension age of
68 could still expect to receive the state pension for 20 years.
Jonathan Cribb, an Associate Director of the Institute
for Fiscal Studies, said,
“Men and women born more recently are expected to live longer
than their predecessors. That in itself is a strong rationale for
a gradually increasing state pension age. On the other hand,
higher mortality rates in recent years mean that any given
generation is expected to live less long now than was expected at
the time of the last pension age review in 2016. This provides a
justification for delaying the rise in the state pension age from
67 to 68 that was previously planned for the late 2030s. But to
do so would cost money. There are significant long-term fiscal
challenges coming from the ageing population and delaying the
rise in the state pension age will cost the Exchequer around £8-9
billion for each year of delay.”
ENDS
Notes to Editor
The planned increase in the state pension age from 67 to
68 is an IFS comment by Jonathan Cribb, Carl Emmerson,
Heidi Karjalainen, Laurence O'Brien, David Sturrock.
