State pension age set to rise to 68 by 2037
The Department for Work and Pensions (DWP) has confirmed a significant change to the state pension age, affecting everyone currently under the age of 49. According to the Office for Budget Responsibility's latest Fiscal Risks and Sustainability report, the state pension age is expected to rise to 68 by 2037, seven years earlier than the current statutory timetable of 2044-2046. This change is projected to save the government £6 billion annually.
The report highlights that state pension costs currently stand at £146 billion, representing 4.8% of GDP. In 50 years, this is forecast to rise to 8.6% of GDP, driven by an ageing population and increased life expectancy.
Triple lock under scrutiny
James Kirkup, a commentator writing in The Telegraph, warned that the government cannot rely solely on scrapping the triple lock to fix the pension system. He stated: "The state pension can’t be made cheaper by AI: it’s just a cash transfer. And a healthier population could actually make it more expensive as – happily – people live to claim it for even longer."
Kirkup outlined two main ways to make the state pension more affordable: increasing it more slowly, which relates to the triple lock, and raising the pension age. The triple lock currently guarantees that the state pension rises by the highest of average wage growth, inflation, or 2.5%. However, Kirkup noted: "But the lock is only part of the pension problem."
Legal process and OBR indications
The statutory review of the state pension age, which began last year, is due to conclude by 2029. However, the OBR report's footnotes suggest that decisions have already been made. The report bases its economic forecasts on the pension age rising to 68 in 2037, rather than the current legal timetable. Kirkup explained: "Because the pension age is set in law, there is a legal process for changing it. A statutory review of the state pension began last year, with conclusions due by 2029. But the footnotes of that OBR report suggest decisions are already made. Those notes say that government economic forecasts are all based on the pension age rising to 68 in 2037, seven years sooner than the statutory timetable. This new timeline will save £6bn a year; without it, the fiscal outlook would be even grimmer."
DWP statement on pension age changes
The DWP issued a statement clarifying the current legal position: "Under the Pensions Act 2007, the State Pension age for men and women will increase from 67 to 68 between 2044 and 2046. The Pensions Act 2014 provides for a regular review of the State Pension age, at least once every 5 years. The review will be based on the idea that people should be able to spend a certain proportion of their adult life drawing a State Pension. The first review must be completed by May 2017."
The statement added: "As well as life expectancy, it will take into account a range of factors relevant to setting the pension age. After the review has been reported, the government may then choose to bring forward changes to the State Pension age. Any proposals to do so would, like now, have to go through Parliament before becoming law. The government is not planning to revise the existing timetables for the equalisation of State Pension age to 65 or the rise in the State Pension age to 66 or 67. However the timetable for the increase in the State Pension age from 67 to 68 could change as a result of the review."
The DWP also referenced a previous Autumn Statement: "In the Autumn Statement on 5 December 2013, the Chancellor announced that this government believes that future generations should spend up to a third of their adult life in retirement. This principle implies that State Pension age should rise to 68 by the mid-2030s, and 69 by the late 2040s. However, the government is not currently legislating for this change – these dates are indicative only, showing a general direction of travel for future State Pension age changes."
