The Intergenerational Foundation has urged Prime Minister Andy Burnham and Chancellor John Healey to increase the state pension age to 70 by 2035, a move that would affect millions of Britons. The recommendation comes in response to the Second Pensions Commission Interim Report and aims to address the growing fiscal pressures on the state pension system.
Think tank calls for faster pension age rise
The Intergenerational Foundation (IF) has long advocated for raising the state pension age to 70 by 2035, with an automatic adjustment mechanism linked to life expectancy taking effect thereafter. The think tank argues that such a step is essential to slow the rise in the old-age dependency ratio and reduce the cost burden on working-age income.
Current legislation already sets out that the state pension age will rise to 67 between 2026 and 2028, and to 68 between 2044 and 2046. However, life expectancy increases continue to outstrip these planned rises, according to the report, making the current trajectory fiscally unsustainable.
Government Actuary warns of fiscal unsustainability
The report cites the Government Actuary's Department 2020 Quinquennial Report, which finds that the current trajectory is not fiscally sustainable in isolation. It will require more rapid increases in the state pension age, increased National Insurance contributions, or Treasury grants to maintain the system's viability.
In response, the IF recommends that the current review consider raising the state pension age faster than currently legislated. The report warns: "Raise the State Pension age and introduce a clear automatic adjustment mechanism linked to life expectancy."
Impact on those born after 1960
The state pension age is already set to rise gradually from 66 today to 67 by early 2028, affecting people born on or after 6 April 1960. An independent review of the state pension age is currently underway, considering the framework for increases beyond 67.
The Institute for Fiscal Studies (IFS) also supports a rise, stating: "In coming years, there is a good case for legislating for further increases in the SPA beyond 68, as part of the response to rising life expectancy and the resulting public finance pressures."
State pension spending to reach 8% of GDP
The fiscal pressures are significant. The Office for Budget Responsibility forecasts that state pension spending would rise to close to 8% of GDP by the early 2070s, even if the state pension age rises to 69. This compares to around 5% of GDP today, highlighting the urgent need for action.
The IF's recommendation to increase the state pension age to 70 by 2035 is part of a broader push for pension reform to ensure long-term sustainability. The think tank has previously argued for moving to a two-thirds longevity link after 2035, which would automatically adjust the pension age in line with changes in life expectancy.
As the review continues, millions of workers approaching retirement face uncertainty over when they will be able to claim their state pension. The outcome of the review will have profound implications for retirement planning across the UK.
