Opinion: delaying State Pension age increase helps no-one

Kicking the can down the road doesn’t solve our pension issues, it simply leaves the mess for someone else to clear, argues John Fitzsimons.

The Government has put an end to suggestions that it may be set to bring forward an increase to the age at which we can start to receive the State Pension.

At the moment, the State Pension age ‒ which dictates when you can receive the State Pension ‒ is set at 66 for both men and women. However, there are plans in place for when that needs to increase.

Currently, the timetable sets out that the State Pension age will move to 67 between 2026 and 2028, and then to 68 between 2044 and 2046.

However, over the last few months there has been heightened speculation that this latter increase is to be brought forward to 2037-39. 

Kicking the can down the road

This speculation was brought to an end by Mel Stride, the secretary of state for work and pensions, in the House of Commons.

Stride said that a review of the current planned dates for the increase to 68 would be conducted within two years of the next Parliament, essentially kicking the can down the road.

Stride noted that we don’t yet have an understanding of the long-term impacts of recent challenges, such as the pandemic and the spike in global inflation, and as such, no decisions should be made just yet about whether the State Pension age hike should be brought forward.

He also pointed out that increases in life expectancy have levelled off, which has raised questions around whether the increase to 68 is suitable in the current timetable.

A conversation we don’t want to have

It’s absolutely understandable why the Government doesn’t want to kick the hornet’s nest that is the State Pension age at the moment.

The Government is unpopular enough at the moment, and so has little room to upset yet more people with an election on the horizon.

This particular subject is likely to be even more emotive given the protests taking place in France at the moment, over exactly the same subject.

Of course, in France, people have taken to the streets over the prospect of the State Pension age moving from 62 to 64.

Imagine how cross they would be if faced with our State Pension regime…

It’s also true that changes to State Pension are a big call. Many pensioners rely on it for a significant portion, if not the entirety, of their income in retirement.

As such, when changes are made they need to be made carefully.

Regional variances

Analysis from Canada Life highlights the disparities in life expectancy, and what that can mean for the State Pension. 

Right now, the life expectancy for a 65-year-old man in Kensington & Chelsea can expect to live a further 22.4 years.

Yet a man of the same age in Barking & Dagenham, just the other side of London, has a typical life expectancy of a further 17.5 years. 

The reality is that depending on where you have spent your life, you may have a very different life expectancy.

Hiking the State Pension age can therefore have a seriously detrimental impact on you.

We’ve written before about the fact that regional variances in life expectancy can lead to a £50,000 difference in how much you get from the state, and that needs to be taken into consideration before any changes are made.

What can we afford?

The main reason that any Government would want to increase the State Pension age is cost.

There have been suggestions that delaying the age increase in this way will mean the Treasury spends an extra £60 billion on pensions which ‒ no matter your views on this ‒ is a lot of money.

There are understandably therefore going to be questions around how sustainable such an outlay is, should the pension regime remain in its current form. 

These questions are only heightened when pensioners are set to receive a 10.1% jump in their State Pension payments with the start of the new tax year, courtesy of the triple lock.

That’s not an increase that the vast majority of people of working age are going to see in their pay packets.

That’s not to say that our State Pension is particularly generous ‒ at loveMONEY we’ve broken down how it compares to other nations previously, and the UK doesn’t exactly stand out from the crowd.

Does the delay help anyone?

I’m not sure anyone benefits from this approach from the Government. 

Some pensions analysts have said that moving away from bringing forward the State Pension age increase provides certainty to those likely to retire in the late 2030s, but I’m unconvinced.

Just because this current Government is in no position to make a difficult but arguably necessary move does not mean that a future Government will be similarly shy.

But even if this does in fact settle matters, the nation as a whole doesn’t benefit, given we are going to be paying out ever more astonishing sums to support the growing ranks of the elderly. 

And what’s more, by kicking the can down the road, we again avoid having a real conversation around what sort of pension system we want, and can actually afford, over the long term.

It’s crucial that we have a proper debate around how our State Pension system works, and the bravery to make the right decisions for everyone, not just curry favour with those who are most likely to turn up at the ballot box each election.