The DWP has been urged to intervene to help prevent younger workers from facing a rising state pension age in the next few years
11:50, 07 Jul 2025Updated 11:51, 07 Jul 2025
People born after 1980 could face severe state pension age changes to keep spending in line(Image: GETTY)
A new report from the Institute of Fiscal Studies has highlighted some alarming trends in the state pension system. Most notably, in order for triple lock to be sustainable for the government to fund, the report claims the state pension age would need to be 74 by 2069.
This would see everyone born post-1994 having to work nearly a decade longer than their parents before being able to claim their state pension. The report also notes a small bridging climb in 2049, increasing the state pension age to 69 which would affect everyone born after 1980.
Triple lock is the mechanism which increases state pension payments every year. It works by raising the rates in line with the highest of three figures; wage growth, inflation or 2.5%.
It says: “Modelling in the 2022 Independent Review shows that the increases in the state pension age required to keep spending on the state pension below a certain level of national income would also have to be substantial.
“That modelling shows that to keep public spending on the state pension below 6% of national income while retaining the triple lock, the state pension age would have to rise to 69 by 2048–49.”
Under the existing proposals for state pension age increases, by 2046 the state pension age is predicted to hit 68. Currently, the state pension age is 66 and is expected to rise to 67 between 2026 and 2028.
The report warned that the “unpredictable” way the triple lock increases state pension making it harder to predict how much will be spent on it in the future. It highlighted that by 2050, the cost of state pension could rise between £5billion and £40billion.
However, it also criticised the increase in state pension age. It warned the DWP: “Rising state pension ages have substantially pushed up the risk of income poverty among those in their mid-60s. Those reaching retirement in the private rented sector, increasing in number, are also at a heightened risk of poverty throughout their retirement.”
Instead, it recommends a “four-point guarantee” to replace the triple lock by making state pension increase every year in line with inflation as a minimum and making it earnings-linked. The guarantee also assures that state pension will never be means-tested and that state pension age will increase as longevity does but not at the same rate as longevity.
Mike Ambery, Retirement Savings Director at Standard Life, told Birmingham Live: “The report correctly identifies widespread under-saving and gaps in pension provision.
“We are supportive of their conclusion that there is not a one-size-fits-all solution to these problems, but there is a need to be more inclusive, particularly for the self-employed, as well as for younger workers who are not yet included.
“The risk of over-saving for those on low incomes is significant, but so too is the need for most of those on average or higher earnings to save more. Striking the right balance will be a key challenge of the adequacy review, and any change would need to be carefully considered and in consultation, especially with employers.“
The report also calls for some changes to automatic enrolment, which is the process that most people are enrolled in workplace pension schemes. It praised the “simple design” of automatic enrolment but added: “Despite its strengths, the system faces significant challenges.”
It recommended that the government make it easier for self-employed people to participate and allow people to save more when they are earning more by increasing default contributions for people who are on or above average earnings.