The government is moving forward with proposals to bring forward the planned increase in the state pension age to 68 by at least seven years, as confirmed by its official spending watchdog. This means that millions of people will be required to work an additional year under these plans, since the Office for Budget Responsibility (OBR) has indicated that the 'current policy' is to advance the rise from 2044 to 2037.
In its latest report on the nation's spending, the OBR states that the Treasury has confirmed the decision, despite the planned rise not being in legislation. This impacts anyone born after April 6, 1977.
Current Policy vs. Legislation
Under the Pensions Act 2007, the notional policy remains for the state pension age to rise to 68 from 2044 to 2046. This remains the official guidance for current workers. The State Pension age in the UK is presently increasing from 66 to 67, with the transition occurring gradually across a two-year timeframe between April 2026 and 2028.
But the change means that around five million people who are currently aged between 49 and 55 would have to work for an extra year before being eligible for their state pension. At its current yearly rate, this would cost them £12,500.
OBR Report Details
The OBR report said: 'We assume that the state pension rises to 68 in 2037-39, and then to 69 in the 2070s.' It adds that, if the government were to follow the legislated 2044 plan, it would cost 'an average additional £6 billion in today's terms in each of the years the state pension age rise is delayed.'
A new review of the state pension age was initiated by the Labour Party last year, as required by law to be carried out every six years. This review is led by Dr Suzy Morrissey, the deputy director of the Pensions Policy Institute, in collaboration with the Government Actuary's Department.
Historical Context and Legal Requirements
The recommendation to raise the state pension age to 68, starting in 2037, originated in the first review, published in 2017, which was prompted by then-Prime Minister Theresa May. Any changes to the state pension age must be announced at least ten years in advance.
According to the DWP, increases to the State Pension age take a 'range of factors' into account, and any changes must go through Parliament before becoming law. Therefore, legislation for the planned increase to 68 by 2037 needs to be introduced by next year at the latest.
Government and Expert Reactions
Pensions Minister Torsten Bell has stated that the government has not yet made a final decision on increasing the state pension age to 68. Asked about the issue by the Work and Pensions Committee in March, he said: 'We want to make sure that we have a sustainable state pension for the longer term, because one of the most worrying things, if you look at the data at the moment, is the reduction in trust in the pension system. Fairness is a very central part of why the state pension exists, and the design features of the state pension show that that is also something of cross-party consensus.'
Economist Paul Johnson, the former head of the Institute for Fiscal Studies, commented: 'Current legislation is that the pension age will not rise until the mid-2040s. If it is the government's firm intention that it should rise sooner than that, they need to say so publicly and get on with legislation — and fast. People need certainty and, ideally, at least a decade's notice. It is, however, the right thing to do. For many decades, the retirement age has not kept pace with increasing life expectancy, and these reasonably modest changes to the pension age will help the government's long-term fiscal position. However, the government will also have to look at other areas like the triple lock to ensure that the state pension is sustainable in the longer term,' he told The Times.
The Treasury said that plans to bring forward the state pension rise are not 'new information'. A spokesperson told The Times: 'The previous government publicly committed to raising the state pension age to 68 between 2037 and 2039, and the OBR has reflected that position for years. The state pension age review, which will consider what the timetable for state pension age should be in the coming decades, is currently underway, and we cannot pre-empt the outcome.'
The planned increase to the state pension age to 67 began in April this year, affecting all workers born after April 1960.
