The DWP has today announced the outcome of its statutory review into the state pension age, and has published two supporting reports – the independent review by Baroness Neville Rolfe and the Government’s Actuary’s report.
The key decisions by DWP are:
– No change will be made to the legislated timetable, meaning that pension age is currently still set to rise to 67 by 2028 and 68 by 2046;
– A fresh review two years into the new Parliament (2026) which will take account of the 2021 census data and clearer information on the impact of the Pandemic on long-term life expectancy
– Keeping to the ‘10 year notice’ rule, which means that a review in 2026 could in principle still recommend changes as soon as 2036;
The previous state pension age review (by Sir John Cridland) recommended moving from 67 to 68 between 2037 and 2039, and that had been the government’s policy until now. The Neville Rolfe review proposes that transition happen between 2041 and 2043, but the government has decided not to implement that recommendation because of the uncertainty around life expectancy and other key factors.
The latest projections for state pension spending as a share of national income based on current policy are shown below:
|State pension spending as % of GDP||4.8%||4.9%||5.5%||6.2%||7.3%||8.1%|
However, the Neville Rolfe review also argues that there should be a cap of 6% of GDP on the total level of state pension spending. If this rule was implemented, state pension age would rise from 68 to 69 between 2046 and 2048. Anyone born after 1979 would therefore have a pension age of at least 69. As the population ages, this new rule would imply even further increases in state pension ages or reductions in the value of state pensions.
Commenting, Steve Webb, partner at LCP said:“It is welcome that the government has taken account of the big slowdown in life expectancies in recent years and has held off any further increases in state pension ages for now. But there is a sting in the tail in the analysis which the government has published today. If it adopts the idea of placing a cap on the share of national income spent on pensions, this would mean a rapid increase in pension ages, including a rise to 69 before the end of the 2040s. This would be a draconian shift in policy which would be likely to mean today’s younger workers facing a pension age of 70 or above”.