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The UK government has confirmed it will not bring forward a rise in the state pension age to 68, saying a review of the policy will be delayed until after the next general election.
The state pension is at present 66 for men and women, rising to 67 from 2026. It had been due to gradually rise to 68 from 2037, under plans first announced by ministers in 2017.
But Mel Stride, work and pensions secretary, told MPs on Thursday that shifts in life expectancy would need to be factored in and that more changes would not be made before a further review, as first reported by the Financial Times.
“Since the 2017 state pension age review was undertaken, the rate of increase in life expectancy has slowed,” he said.
In a report published on Thursday, the government said: “For example, in the 2014-based projections that informed the 2017 review, life expectancy at age 65 was projected to reach 27.3 years by 2060, whereas in the latest 2020-based projections it is projected to reach 24.4 years.”
In a separate report released alongside the government’s review, Baroness Neville-Rolfe, a Tory peer, recommended pushing back the increase to 68 by four years to 2041-43 and imposing a limit on state pension-related spending of up to 6 per cent of gross domestic product.
But the government said it would not adopt Neville-Rolfe’s recommendations, made as part of an official review into the state pension age, since she had not been able to account for “the long-term impact of recent significant external challenges, including the Covid-19 pandemic and recent global inflationary pressures”.
“This brings a level of uncertainty in relation to the data on life expectancy, labour markets and the public finances,” it added.
The government said an existing timetable of 2044-46 for the SPA rise to 68 remained in place but that it expected a further review of this schedule to take place within the first two years of the next parliament.
“The current rules for the rise from 67 to 68 therefore remain appropriate,” it said.
Pension experts on Thursday raised concerns about the impact of the government’s decision on the public finances after the Institute for Fiscal Studies think-tank suggested that delaying the rise to 68 risked costing the Treasury £9bn a year.
David Sinclair, chief executive of the International Longevity Centre, a think-tank, said that a delay “may be politically expedient but, in the long term, it is inevitable that we will be getting our pension later than previous generations”.
“A failure to make the tough decision now will give any future government difficult financial choices about increasing taxation or reducing spending,” he added.
Steve Webb, former pensions minister and now a partner at LCP, an actuarial consultancy, said placing a cap on the share of national income spent on pensions could cause 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,” said Webb.
Separately, a public sector union criticised the government’s decision to change the formula for calculating pension costs in workplaces such as schools and hospitals from April next year.
The revision followed a scheduled review of the formula, but Prospect warned that the move risked adding tens of billions of pounds to employers’ bills.
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