Ministers want to raise the state pension age to 68 several years earlier than planned in a “big bazooka” bid to raise billions for the Treasury, it has been reported.
Under current legislation, the retirement age is set to rise to 67 in four to six years’ time, and then to 68 by 2046, although the government’s stated plan is for the latter to happen by 2039.
But it is claimed that relevant ministers and officials in each of this year’s three Conservative governments led by Boris Johnson, Liz Truss and now Rishi Sunak have been inclined to bring that date further even forwards.
A date of the mid-2030s is now widely favoured, with ministers keen to leave a gap of at least a decade between legislating for the policy and it coming into action, the Daily Telegraph reported, citing multiple current and former government officials.
Even raising the pension age just one year earlier than currently planned could raise more than £9bn for the Treasury, with some £8bn saved in pension payments and an additional £1.3bn taken in taxes on extra earnings, pensions consultancy LCP told the paper.
It was also claimed that Ms Truss believed the move was a “silver bullet” and was initially minded to include it in her and then-chancellor Kwasi Kwarteng’s disastrous mini-Budget – which has since sparked alarm within government about the need to reassure investors of the UK’s fiscal responsibility.
While the Conservative Party has grappled with the issue over the past decade, there is reported to be a belief in Whitehall that automatically linking changes in the pension age to life expectancy could help depoliticise the matter.
“The government is required by law to regularly review the state pension age and the second state pension age review is currently considering, based on a wide range of evidence including latest life expectancy data and two independent reports, whether the rules around state pension age remain appropriate,” a Department for Work and Pensions spokesperson said.
“The review will be published in early 2023,” they said, stressing in response to the Telegraph report that “no decision has been taken on changes to the state pension age”.
Sir Steve Webb, the David Cameron-era pensions secretary who is now a partner at LCP told the paper that “it is tempting for the Treasury to see increases in state pension ages as ‘easy money’”.
“But an aggressive schedule of pension age rises is simply not justifiable based on the latest evidence on life expectancies,” he said. “The improvements in life expectancy, which were expected when this issue was last reviewed, have simply not materialised.”
He warned that raising the pension age could see thousands of additional people forced by poor health to turn to benefits during the final years of their working lives.
“In some more deprived parts of the country, it is typical for people to be in poor health a decade before current pension ages,” Sir Steve said. “Before pension ages are hiked again, much more needs to be done to tackle the vast inequalities across the country in health outcomes and in life expectancies.”