‘Fair thing to do!’ State pension age increase set to be accelerated – more changes due
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The state pension age is currently 66, after a process of equalisation between the sexes and rising from 65. However, this is not the end of the changes which are scheduled for the state pension.
The first review of state pension age was undertaken in 2017, and concluded the next review should consider whether the increase to age 68 should be brought forward to 2037 to 2039.
This is before tabling any changes to legislation, it should be noted.
The original report states: “The Government intends to follow the recommendation John Cridland made in his independent review to increase the state pension age from 67 to 68 in 2037–39, bringing bringing it forward by seven years from its current legislated date of 2044–46.
“This is the fair thing to do. It is also the responsible course of action.”
The Government cites findings pointed out by Mr Cridland which show state pension spending is set to rise.
The business executive who conducted the first state pension age review highlighted annual spending on the sum is set to rise by an extra one percent of Gross Domestic Product (GDP).
This will take the percentage up from 5.2 to 6.2 percent, but if that rise in spending was faced today it would be an equivalent tax rise of £725 per household.
Britain has an ageing population which means millions more will enter retirement in the coming years.
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The Government asserts the action it is taking will bring the sum down to an equivalent saving of around £400 per household.
As costs must be controlled, the Government said the only alternative to bringing state pension increases forward would be to pay lower state pensions.
This, it added, would have a knock-on effect for pensioner poverty and financial stability for older people.
In addition, working people would potentially have to pay more of their incomes through tax to support the state pension.
It explained: “Our timetable achieves the right balance.
“Because life expectancy is increasing, people affected by this rise will be spending longer on average in receipt of the state pension than people have spent over the age of 65 over the last 25 years, and on average will receive more in state pension over their retirement than previous generations.”
The second state pension age review was announced in December 2021, and is currently ongoing to look further into the matter.
The DWP has acknowledged this is a “big decision with significant consequences”, hence why the second review is being conducted.
It will determine whether or not the increases to age 68 should also be brought forward or not.
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If this recommendation were to go ahead, it could see the rise to 68 moved forward to 2037.
This would mean millions of people born between April 6, 1970 and April 5, 1978 could face a longer wait to be eligible for the state pension.
In accordance with the law, the second review must be published by May 2023, leaving individuals with months of waiting to determine the outcome.
The new review will consider a wide range of evidence before a conclusion is reached.
This includes life expectancy data, the costs of an ageing population and future state pension expenditure.
During the passage of the Pensions Act 2014, it was decided evidence from across the UK would be considered.
As a result, the Government states: “The review will therefore consider differences across countries and regions, including Northern Ireland.
“It will also consider the effects for individuals with different characteristics and opportunities, including those at risk of disadvantage.”
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