Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a1034965

Government brings forward rise in state pension age

State pension age set to rise to 68 seven years earlier than previously planned, but government faces battle to secure votes for change.

 
Government brings forward rise in state pension age

The government has announced the state pension age will rise to 68 seven years earlier than previously planned.  

The change is in line with a government-commissioned report led by John Cridland, former director general of the Confederation of British Industry and published in March this year. 

Under current legislation, from December 2018, the state pension age for men and women will increase to 66. It will then rise to 67 between 2026 and 2028 and to 68 between 2044 and 2046.

Cridland's report said the state pension age should rise from 67 to 68 between 2037 and 2039. 

Now the secretary of state for work and pensions David Gauke (pictured) has said the government accepts this recommendation.

'This is about the government taking responsible action in response to growing demographic and fiscal pressure,' he said.

In an article for the Financial Times last month Gauke said he was prepared to make ‘big decisions’ on pensions.

Labour said it opposed the government's plans, and stood by its manifesto pledge to keep the SPA as it is. 

In response to this announcement, Labour’s shadow work and pensions secretary Debbie Abrahams said the opposition party did not support the government’s decision.

‘Labour wants a different approach, in our manifesto we committed to leaving the state pension age at 66,’ she said.

Gauke said Labour’s approach was ‘reckless, short-sighted and irresponsible’.

‘Fixing the state pension age at 66 demonstrates a complete failure to deal with the situation in front of us,’ he said.

The Scottish National Party also opposed the plan to raise the state pension age above 66.

Tom Selby, senior analyst at AJ Bell, said because of this opposition from other parties it would be very difficult for the government to secure the votes needed to make the change.

‘The government could well face a serious battle to get this unpopular measure through the House of Commons,' he said.

'Labour has already indicated it will oppose such reform and, with a wafer thin majority, only a few rebellious MPs would leave the plans on a political knife edge.'

Former pensions minister Steve Webb, who served under the Conservative-Liberal Democrat coalition government, said bringing forward the rise was the right move.

'The government is right not to have left this increase  in the pension age until the mid-2040s. Without this decision people of working age would have faced a heavy tax burden.'

But Steven Cameron, pensions director at insurer Aegon, said the plans would be 'particularly concerning for those who through health concerns, job pressures or lack of employment opportunity simply can't keep working into their late 60s'.

'It's ironic that the government is proceeding with an accelerated increase in the state pension age days after statistics show improvements in life expectancy may be levelling off, meaning this increase may be less justified on affordability grounds.'

11 comments so far. Why not have your say?

Denis Calvert via mobile

Jul 19, 2017 at 16:40

There is going to be a lot of people on sickness benefits. People are living longer, but illness is still debilitating. I think this government is very short sighted to think that people in there late sixties will be doing work they did in there twenties

report this

Michael Stevens

Jul 19, 2017 at 16:57

Excellent news that the State Pension age is going to rise. It should go to 70 by 2050.at the latest.

Just remember that when the State Pension was introduced in 1909 the age was 70

report this

Tony Airey

Jul 19, 2017 at 17:09

The thought process of people who have never lifted anything heavier than a briefcase.

They give no consideration whatsoever to the legions of working people who are dependent on physical fitness to earn their livings.

And how does this square with the most recent report which concludes that life expectancy is no longer increasing as expected?

report this

JohnnyM

Jul 19, 2017 at 19:01

One of these days (please!) someone in this Government (and Conservative party) will start to understand how politics works, and will also get commitments from employers to employ people at this age before making such crass and stupid announcements. Oh, and start to do their homework about the reversing increasing in Life Expectancy. I hope (and expect) this gets smashed to smitherines in the Commons, as it is totally unacceptable to all parties involved in the real world.

It seems to me that the Conservative party has been infected with a suicide death-wish with their total incompetence and lack of understanding that their number 1 task MUST BE to recover the trust and acceptance of the electorate of this country. And they'd better do it soon, otherwise there will be a landslide Corbyn governement within 6 months, no Brexit, and precious little else to cheer about other than profligate waste of the country's money.

report this

Jim99

Jul 19, 2017 at 19:15

One of the real problems is that many public sector workers get a work based pension so much earlier, often in their early sixties and in some sectors in their fifties. For such people they have much less difficulty dealing with such changes. Unfortunately this is generally not the case for private sector workers. Help resolve this issue and there will be more headroom to hold back the state pension age. It will never happen though because no government is likely to take on the challenge of making true comparisons between the total of pay and pensions for private sector workers and public sector workers. I understand that for some police officers the benefits including early retirement are equivalent to an effective employer contribution of 35-40% of pay. In the private sector people are lucky if their employer pays in 6%. Until such differences are recognised, published and acted upon the take on public funding for public sector workers will impact what's left for funding state pensions for all.

report this

Roger Savage

Jul 19, 2017 at 19:20

@ Michael Stevens - yes and in 1909, benefits scroungers didn't exist, we didn't pay £1bn/month in foreign aid and the public sector actually served the public (rather than the other way round) and didn't receive gold plated pensions. We also didn't have politicians who opened the floodgates to people who wanted to 'make a better life for themselves' in our country whilst expecting the public to bankroll it unquestioningly whilst their own standard of living is diminished. All to appease businesses (party donors) who want cheap labour or benefit from a crowded island (houses to sell, etc...)

Pensions that have been bought and paid for by hard working people contributing to society should not end up further and further out of reach.

If there's enough money to waste on some of the least deserving in society, why do people who are deserving of what they have *earned* have to wait longer and longer?

report this

andy mac

Jul 19, 2017 at 19:55

I cannot wait until the fire fighters are 65+ and that police look older than me

Primary school teachers with replacement hips and knees crawling on the ground with the MPs having pensions in the millions having done SFA

Once again pensions will not be paid out as most people will be in care homes - the next selling scandal

Come the revolution and red John and brother Jaz. Then watch the plughole swallow us

report this

halfinchnut

Jul 20, 2017 at 10:15

Unbelievable stupidity from a government barely hanging on to power. I thought Mrs. May would turn out to be one of our greatest PM's ever, how wrong was I. She can't have too many toes left to shoot off now.

report this

william Westlake

Jul 20, 2017 at 10:26

@Tony Airey, I think that your point about jobs being physically impossible for people of a certain age is well made. It is not just jobs with a high manual load but also those requiring high levels of dexterity such as surgeons, and jobs requiring high levels of intellectual dexterity. Would you rather a 70 year old pilot at the controls of your airliner or an experienced 50 year old pilot?

However the fact remains that with increasing life expectancy, current arrangements are unaffordable, and unfair to those tax payers who are unfortunate enough to die in their 50's and 60's. The tedious party political mud slinging of scrooge-like uncaring Tories accusing a crack-pot Labour left of promising the unaffordable earth to the world and his wife is entirely unhelpful and simply obstructs intelligent debate about how it is all going to be paid for and by whom.

report this

Dave Hill

Jul 20, 2017 at 11:04

Many people work well into their 70's. Personally, I had a hard physical job offshore and finished last year at 69. I didn't fancy another 4 years. I now have a less demanding onshore job driving. I'm 70 and expect to do it for a few more years.

Older people are generally healthier and fitter than in the past, and if my facts are correct after the 2nd. world war the average life span was 67/8 and the pension age was 65.

report this

horshamtim

Jul 20, 2017 at 12:13

As usually the case, this issue brings out comments that perpetuate a lot of myths. I find my fellow pensioners in particular often take a distorted and unrealistic view.

The hard fact is that the funding of the current state pension is unsustainable, with or without the triple lock. Why do I say this - state pensions are now one of the three remaining big ticket items in the Government budget along with health and education following the squeeze since 2010. State pensions plus the associated other benefits for the over 65s now account for around 20% of the entire budget. With a disproportionate use of the NHS and social care costs, these three alone account for over 30% of the budget. This percentage will rise anyway due to demographics and the fact that long life is often associated with poor health and disability.

State pensions are wholly funded out of current taxation and always have been - my 40 years plus of NI contributions went to pay for pensioners then, and as there were fewer of them for most of that time I paid a lot less than the current 12% hit. The ratio of workers who pay NI to pensioners who don't has been declining for some time, and if we actually do boot out 2.2 million EU workers who are paying both tax and NI, that ratio will drop much faster.

There are only three options:

1. Push back the state retirement age as is being done. Probably not by enough, and it means that today's workers are paying for our pension benefits which they will not get themselves. Pensioners may think that is fair but few others do.

2. Reduce the value of the state pension benefit - which is one of the lower ones in the OECD.

3. Increase taxation.

All of these are politically unpopular with one group or another. It is unsurprising that the politicians go for 1 - it is the most acceptable to the elderly who vote (but consider the recent election results), and the pain won't be felt until long after their term of office. We need a long term cross party consensus for this whole issue, but that isn't going to happen.

Consider also that the people who benefit most from current state pensions are the better off - on average they have a longer and healthier and disability free life expectancy than those on low incomes. Given that about 75% of those retiring last year had occupational pensions and/or other income, pensioner poverty while it still exists is much less apparent than before. And we all pay 12% less tax than workers whose salaries may be no more than our pensions...

Pensioners who believe they are entitled to even more of the cake whatever their personal income need to look at themselves.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts


In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Read more...

10 global stocks for a late bull market

by Gavin Lumsden on Jun 25, 2018 at 00:00

Sorry, this link is not
quite ready yet