The Office for Budget Responsibility (OBR) has based its latest long-term forecasts on the UK Government's current policy of increasing the State Pension age to 68 between 2037 and 2039, a move that could affect millions of workers currently in their late 40s and early 50s, forcing them to wait an additional year before receiving their State Pension.
Current Legislation vs. Proposed Changes
The State Pension age is already rising from 66 to 67, a change that began in April this year and is due to be completed by March 2028. Under existing legislation, the State Pension age is then scheduled to increase from 67 to 68 between 2044 and 2046. However, the OBR's Fiscal Risks and Sustainability report assumes the increase to 68 will instead take place between 2037 and 2039.
The report states: "The State Pension age reaches 68 between 2037 and 2039, which the Government has confirmed is its current policy position rather than the rise to 68 happening between 2044 and 2046 as is currently legislated for."
Impact on Workers
If the earlier timetable is introduced, millions of people in their late 40s and early 50s would have to work an extra year before becoming eligible for their State Pension. The OBR said it includes stated UK Government policy on future increases to the State Pension age when producing its long-term projections for the UK's public finances. The report also assumes the State Pension age will increase to 69 between 2073 and 2075 as part of its long-term projections.
The UK Government has not yet changed the law, meaning the current legal timetable remains for the State Pension age to increase to 68 between 2044 and 2046. Any earlier change would require legislation to be approved by Parliament.
Government Review and Fiscal Pressures
The UK Government is carrying out its latest statutory review of the State Pension age, which must take place every six years. The review is considering the timing of future increases in light of factors including life expectancy and the long-term sustainability of the State Pension system. The OBR said population ageing will continue to place increasing pressure on the UK's public finances over the coming decades.
It projects spending on the State Pension will increase from around 5% of GDP in 2030-31 to around 9% by 2075-76, driven by an ageing population and the continued use of the Triple Lock to uprate payments. The watchdog also estimates that following the current legislated timetable, rather than increasing the State Pension age to 68 between 2037 and 2039, would cost the public finances an average of around £6 billion a year in today's terms for each year the rise is delayed.
