IFS report warns of substantial rise in state pension age
The state pension age could increase to 74 by 2069 if the triple lock is retained and public spending on pensions is capped, the Institute for Fiscal Studies (IFS) has warned. The think tank's analysis highlights the growing financial pressure on the state pension system as longevity continues to rise.
According to the IFS, to keep spending on the state pension below 6% of national income while maintaining the triple lock, the pension age would need to reach 69 by 2048–49 and 74 by 2069. The triple lock ensures the state pension increases annually by the highest of inflation, average earnings growth, or 2.5%.
Four-point guarantee proposed to stabilise pension system
The IFS has proposed a 'four-point guarantee' for the state pension to boost confidence and ensure long-term sustainability. The guarantee includes: setting a clear earnings-linked target for the new state pension to improve predictability and ensure pensioner incomes keep pace with living standards; guaranteeing the state pension always increases at least in line with inflation; ensuring the state pension is never means-tested; and continuing to increase the state pension age as longevity rises, but at a slower pace than the increase in life expectancy.
Longevity gains outpace pension age increases
The report notes that the state pension age was 65 for men and 60 for women from 1940 to 2010. Since 2010, it has risen to 66 for both sexes. However, longevity at older ages has increased dramatically. For example, between 1975 and 2020, life expectancy for men at age 50 increased by eight years, while the state pension age for men increased by just one year. This means the time men aged 50 could expect to receive the state pension increased by seven years over that period.
The IFS warns that without further increases in the state pension age, the cost of the triple lock could place an unsustainable burden on public finances. The report states: "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."
