Today’s new job recruits may face a minimum retirement age of 70 years if the recommendation from the Government Actuary’s Department (GAD) will be accepted. If the proposal is accepted, it will affect about 6 million people who are now in in their 30s. According to the report, there could be a possible need for the state pension age (SPA) to rise to 70 between the years 2054 and 2056. The current government plan in place puts the retirement age at 66 between years 2018-2020, then will rise to 67 between 2026-2028 and then rise to 68 between years 2044-2046.
A retirement age of 68 until 2039 suggests another analysis made by independent expert, John Cridland, the former director-general of the Confederation of British Industry. Gridland’s separate study concludes, that the earlier SPA rise will keep the state pensions affordable for taxpayers and provide better “intergenerational fairness.” At the moment, the Government spends nearly £100bn a year to cover state pensions and pensioners’ benefits.
In a recent document provided by the Office for National Statistics (ONS) shows, that the UK population is expected to rise up to 70 million people in the next ten years, 20% of whom will be pensioners. Therefore, the proportion between the ones at working age and the ones at retirement age is increasing. Gridland’s proposal aims to “smooth the transition for tomorrow’s pensioners, and to try and make the future both fair and sustainable.”
The Government is expected to debate the possible changes in May, but the reports have already been criticized. According to Tom McPhail, head of retirement policy at Hargreaves Lansdown, the new rise of SPA is “going to be particularly unwelcome for anyone in their early 40s, as they’re now likely to see their state pension age pushed back another year. For those in their 30s and younger, it reinforces the expectation of a state pension from age 70, which means an extra two years of work. This report also looks like the death-knell for the state pension ‘triple lock.’”
The Triple Lock
The so called “triple lock,” was introduced in 2010 and it aimed to guarantee the growth of the state pension every year by the increase of inflation, average earnings or a minimum of 2,5% whichever is the highest.
However, the reports for GAD and John Cridland, suggests that ministers should cancel the “triple lock”. “There’s a danger of a generation who can’t afford to retire” fear the experts. Contrariwise, their idea was opposed by the unions. “Hiking up the state pension age will hit low paid workers the hardest, and it will punish those who become too sick to work. Ending the triple lock while driving up state pension age would be a stealth cut to the future incomes of workers who are today in their 30s and 40s. There is a 20-year gap in healthy life expectancy between the richest and poorest. These changes risk only the wealthy enjoying a decent retirement,” Frances O’Grady, General Secretary of British Trades Union Congress commented.