State Pension Age could rise to 70 for millennials
An analysis for the Department for Work and Pensions (DWP) has suggested that workers under the age of 30 may not get a pension until they reach age 70.
A second report by John Cridland, director-general of the Confederation of the British Industry proposes that those under the age of 45 may have to work to 68 resulting in millions of people in their late thirties and early forties now looking set to have to work for an extra year. He said that the aim was for a ‘smooth transition for tomorrow’s pensioners’ and try and make the future more ‘fair and sustainable’.
The findings will help the government make their decision on what will happen to the State Pension Age (SPA) which is due in May.
The SPA is the earliest age that somebody can receive their state pension and is set to rise to 66 between 2018 and 2020, to 67 between 2026 and 2028 and then to 68 between 2044 and 2046. In the worst case situation, GAD calculations suggest the change in retirement age from 67 to 68 could be pulled forward by as much as 16 years.
The prospect of faster increases to the SPA was put to ministers as they consider ways to manage the growth of the UKs aging society, as by 2050, 56,000 Britons are expected to reach the age of 100. The government currently spends about £100bn a year on state pension and pensioner benefits and this is expected to grow as the population inevitably ages.
The scenario is based on the assumption that people spend 32% of their adult life in retirement compared to the conventional assumption until now which has been that people will spend 33.3% of their lives in retirement.
The increase in the state pension age is not the only solution. The government could look into other measures, such as increasing National Insurance Contributions but this would be unpopular and immediate, whereas the impact of a higher state pension would not be felt until further into the future.