Under a new proposal, the state pension age in the United Kingdom could be raised to 71, but experts warn that this hike may increase poverty rates among older adults. Presently, the age threshold for receiving the state pension is 66. Legislative changes already plan for this to rise to 67 between 2026 and 2028 and to 68 between 2044 and 2046.
Recent research by the International Longevity Centre has suggested that the state pension age might need to be increased to 70 or 71 by 2050 to address affordability concerns and demographic imbalances. However, the Institute of Fiscal Studies (IFS) has warned that raising the pension age could elevate poverty levels among those close to retirement. Previous increases have shown such trends; for instance, the rise from 65 to 66 increased the income poverty rate of 65-year-olds by 15 percentage points.
Chancellor Rachel Reeves may face difficult decisions regarding the state pension soon.
Potential impact on older adults
The IFS has highlighted in their report “Pensions: Five Key Decisions for the Next Government” that while increasing the state pension age might be a practical response to the pressures on public finances caused by increased life expectancy, it could exacerbate financial hardship for those unable to continue working up to the new retirement age.
Government analysis forecasts that taxpayer spending on state pensions could double in the coming years. The Office for Budget Responsibility (OBR) predicts that the cost of the state pension as a percentage of gross domestic product (GDP) will rise from 4.8% to 8.1% by 2071, potentially surpassing the 6% cap on benefits spending by the late 2040s. While addressing pension age adjustments, the IFS has urged policymakers to consider the impact on poorer individuals and those with difficulties continuing in paid work at older ages.
They recommend that if the government decides to bring forward the increase in the state pension age to the late 2030s, those affected should be notified well in advance, respecting the current policy of providing at least 10 years’ notice for any such changes. In addition to raising the pension age, other proposals to control expenditures include reforms to the triple lock policy. However, both major political parties have vowed to maintain the triple lock for the foreseeable future.
As the debate continues, the government is encouraged to proactively address the concerns surrounding future state pension provisions to ensure a balanced approach to public finance pressures and the well-being of older adults.
