The pension age is set to rise to 67 next year(Image: PA)A third review has been launched into the state pension age which could see the possibility of it rising again to 70 in around 20 years, to reflect increasing life expectancy.
The UK state pension age is currently 66, as long as you have 10 years’ worth of National Insurance (NI) contributions. This is however set to rise to 67 between 2026 and 2027 before rising again to 68 between 2044 and 2046. However, how it increases past this point will be decided as part of this latest review.
The current government review into state pension age could see the the pension age changed to automatically reflect life expectancy increases. This method is meant to bring a consistent balance between working and retirement years for each generation.
This technique is already used in Denmark, Italy, Sweden, Finland and the Netherlands. For money-saving tips, sign up to our Money newsletter here.
In line with this method, Denmark recently announced that the retirement age would rise to 70 in 2040 to bring it in line with life expectancy. This will make it the highest retirement age in Europe.
This possible method would work in the government’s favour by reducing the growing financial burden of the UK’s pension bill on gross domestic product (GDP).
By 2050, it’s estimated that a quarter of the UK’s population will be aged 65 or older, something which will only put greater strain on government services and increase the likelihood of the state pension age going up so the country is able to afford it.
This latest review will mark the third state pension review, two years after the second one was published by Rishi Sunak’s Conservative government in March 2023. This latest one is expected to conclude in 2029.
The Pensions Act 2014 means it must be regularly reviewed to ensure fairness between generations whilst considering those people and places which would be impacted most heavily.
The review will take into consideration life expectancy data as well as two reports, one from Dr Suzy Morrissey and the other from the Government Actuary Department. The government has committed to providing at least 10 years’ notice for any significant changes to the age.
Pensions Minister Torsten Bell said the review should deliver “a clear objective: building a strong, fair and sustainable pension system fit for the middle of the twenty first century”. For the biggest stories in Wales first, sign up to our daily newsletter here.
It can also be worth examining the healthy life expectancy index which records the length of time the average person leads a full and healthy life. On average, this currently stands at 61.5 for a man and 61.9 for a woman in the UK.
The government has already committed to the triple lock for the rest of their government term. This ensures the state pension will rise by whichever is highest out of inflation, 2.5% and wage growth.
This ensures pensioners aren’t left behind as living costs continue to rise.