State pension age could require ‘significant’ rise
The state pension age will need to rise to 72 over the next two decades if the government wishes to peg retirement costs to the public purse at the same level as existed in 1981.
That is the estimate of a new report drawn up by the Pensions Policy Institute think-tank as part of its submission to the government’s consultation on the issue.
The PPI also calculated that employees would require a minimum of 10 years’ notice of any change so that they could tailor their retirement plans to the new circumstances.
Under current plans, the state pension age for women is to lift to 65 by 2020. But the coalition government is also consulting on proposals to raise the retirement age for men to 66 by 2016 and for women by 2020.
The PPI’s paper examined how much it will cost to maintain a roughly constant proportion of an individual’s total adult life in receipt of the state pension, while factoring in longer life expectancies.
To remain at 2010 cost levels, the state pension age would need to go up by just six months to 66.5 by 2030.
To remain at 2000 cost levels, the state pension age would have climb to 68 by 2030.
But to reclaim cost levels seen in 1981, the pension age would need to jump to 72 in the next 20 years.
Men should be given at least five years’ notice of the change, and ideally more than 10, the report said, while women should have more than 10 years’ notice.
Women would need longer to adjust their retirement arrangements because they tend to leave the labour market earlier than their male counterparts.