In recent years, the State Pension age (SPA) has increased from 60 to 65 and beyond. The rise to 66 for both sexes is currently in progress and the age will increase yet again in the following decades with increases to age 68 already in law.
The Centre of Social Justice (CSJ), the think tank that first proposed Universal Credit, suggested the SPA should go up to 75 in its latest report back in August
. Founded by Iain Duncan Smith, CSJ proposed that the SPA should be raised to 70 by 2028 and then 75 by 2035.
At the time of publication, both men and women will reach the age of 66 before they can draw their State Pension from October 2020.
The report was the response to the think tank finding ‘serious concerns’ about an increase in life expectancy and a decrease in fertility rates, meaning that older people make up a growing proportion of the population.
The report says: ‘If we expect [the State Pension] to continue in the future along with the full functioning of public services… the UK’s fiscal balance must be corrected’.
The report also stated that: ‘In 2018, less than half of the UK population were in work the year before they were eligible for State Pension. As the population continues to age and scheduled rises in the SPA take place, this gap is likely to grow.’
According to CSJ, raising the SPA would ensure that the Old-Age Dependency Ratio (OADR) remains in the 20 to 25 range in the next 20 years. OADR measures the ratio between the elderly population and is the number of people over 65 years old for every 100 people aged between 16 and 64. This type of ratio predicts increasing levels of economic dependency in the future.
The CSJ report notes: ‘While this might seem contrary to a long-standing compassionate attitude to an older generation that has paid their way in the world and deserve to be looked after, we do not believe it should be. Working longer has the potential to improve health and wellbeing, increase retirement savings and ensure the full functioning of public services for all.’
The SPA rises suggested by the CSJ are not current government policy. However, if the government were to make further increases to the SPA, it is important to consider all of your options when it comes to saving for your retirement.The BTP website is full of resources to help you, whatever your plans are.