The UK government has confirmed plans to raise the State Pension age to 68 for approximately five million Britons, bringing the increase forward by seven years compared to current legislation. The move, which aims to save the Treasury around £6 billion per year from 2037, will affect those currently aged between 49 and 55.
Earlier Than Legislated Timeline
Under the Pensions Act 2007, the State Pension age was scheduled to rise gradually from 67 to 68 between April 2044 and April 2046, impacting those born between April 1977 and April 1978. However, the Treasury has informed the Office for Budget Responsibility (OBR) that it intends to accelerate this timeline, with the increase now expected to take place between 2037 and 2039.
The OBR stated: "We assume that the state pension rises to 68 in 2037-39. The Treasury has confirmed to us that this is the government’s current policy position, rather than the legislated increase set in the Pensions Act 2007."
Review and Rationale
The decision follows a review led by the Government Actuary's Department and Suzy Morrissey, deputy director of the Pensions Policy Institute. Torsten Bell, the pensions minister, confirmed that bringing forward the age rise is under consideration, stating the Labour government wants to "make sure that we have a sustainable state pension for the longer term."
Despite the confirmation, ministers insist no final decision has been made. A Treasury spokesman said: "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 under way and we cannot pre-empt the outcome."
Impact on Affected Individuals
Sir Steve Webb, former pensions minister and now a partner at Lane Clark & Peacock, highlighted the financial implications: "Anyone checking the government’s pension calculator would assume that the pension age won’t be rising to 68 before the mid-2040s. But within government it is widely expected that the age increase will take place seven years earlier than the law currently says. That means around five million people will lose around £12,500 that they might otherwise have been entitled to. Ministers are going to have to be clear about this soon. If they want to increase the pension age in 2037 they are to have to legislate on this next year."
The change means those affected will have to work an additional year before becoming eligible for their state pension, representing a significant shift in retirement planning for millions of Britons.
