A significant shift in the UK's retirement landscape is on the horizon, with a warning that three million people could see their state pension plans pushed back.
Pension Age Increase on the Horizon
Research from Phoenix Insights indicates that if the planned increase to the State Pension age is accelerated, millions may have to delay their retirement. The change, which would bring the age rise to 68 forward to the early 2040s, is being considered by the Department for Work and Pensions (DWP).
This potential tweak comes at a particularly difficult time, coinciding with the ongoing pressures of the cost of living crisis.
Mounting Pressure on the Pension System
Patrick Thomson, Head of Research Analysis and Policy at Phoenix Insights, highlighted the challenges facing the state pension. He stated, "The State Pension remains at a critical juncture with questions remaining over its long-term affordability."
He pointed to stark projections showing that by 2070, the UK will have five million more state pensioners but only one million more people of working age. This demographic imbalance puts immense financial strain on the system.
"Accelerating the State Pension age could mitigate some of the cost challenge," Mr Thomson added, "but recent life expectancy projections are less optimistic, making policy change potentially more difficult."
Call for Supportive Policy Interventions
The report emphasises that not everyone will be able to work to a later state pension age. Therefore, any future change must be paired with measures to support people.
Patrick Thomson stressed the importance of "policy interventions to support greater retirement adequacy," including enabling people to remain in work later in life and boosting pension savings through auto-enrolment.
Another state pension age review is expected during this parliament, which should offer more clarity on the timetable for the future increase to 68. Dr Suzy Morrissey of the Pensions Policy Institute is leading a call for evidence and will examine the merits of automatic increases, a system already used in countries like Denmark.
