State pension age: Why it may have to go up with an ageing population

For years the retirement age was 65 for men and 60 for women. Both are now at 66 years old, and there are plans to make it 67 by 2028 and 68 by 2046.

However, a warning shot across the bows of those who are looking forward to retirement has come from a financial expert who says this may not remain the case.

Tom Selby, the director of public policy at investment firm AJ Bell, said that the discrepancy of life expectancy across the country will prove a headache for the government as it has to fund a bill that currently comes in at about £125bn a year, and will keep on rising.

Selby said: “Despite life expectancy improvements stalling in recent years, the number of people celebrating their 100th birthday has more than doubled over the last two decades. The average cost of paying state pensions in the UK is now around £125bn and, assuming that bill continues to grow as expected as a result of longer-term life expectancy improvements, risks placing an ever greater burden on taxpayers.

“There are already plans in place to increase the state pension age to 67 by 2028 and 68 by 2046, but there is every chance the timetable to 68 will need to be brought forward at some stage – particularly if public finances remain in the doldrums. However, the universal nature of the state pension means doing this will inevitably hit the poorest, hardest.

“Then there is the state pension triple-lock, which provides gold-plated annual increases in the value of the state pension in line with the highest of average earnings growth, inflation or 2.5%. This policy has been useful to successive governments politically but remains potentially very expensive and without a clear end goal.

“Revisiting either the state pension age or triple-lock will not be something the current administration will want to do, particularly after the fallout from the decision to means-test the Winter Fuel Payment, but at some stage a government will need to face up to this challenge and come to a decision on what the state pension should be worth and for how long people should receive it.”