The UK’s state pension age could be increased “sooner than planned” in Jeremy Hunt’s Budget later this month. This comes as the Government is reviewing the long-term affordability of the benefit following the return of the triple lock this year.
Thanks to the triple lock, state pension payments are to be raised by either the rate of inflation, average earnings or 2.5 percent; whichever is the highest.
With September 2022’s inflation figures reaching 10.1 percent, this will be used as the metric to hike retirement payments.
As a result of this, recipients of the new state pension are set to see their payments exceed £10,000 a year for the first time ever.
Concerns have been raised over the long-term affordability of the state pension with the triple lock remaining a staple.
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Steven Cameron, pensions director at Aegon, broke down the concerns over the state pension age which could be addressed in Jeremy Hunt’s Budget.
He explained: “In his November Budget, Mr Hunt announced the state pension triple lock would be retained, meaning a 10.1 percent increase for state pensioners this April.
“This comes at a high cost which is met by the National Insurance contributions of today’s workers.
“At the same time, the Chancellor said a review of state pension age would be published early in the New Year, which could now mean Budget day.
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“On affordability grounds, the Government may argue the state pension age has to be increased to 68 sooner than currently planned, possibly in 10 to 12 years’ time. Increasing it even sooner would simply not give people enough time to plan ahead.”
As it stands, the retirement age threshold is 66 years old but the Government has confirmed this will rise in the near future.
Under current Government rules, the state pension age is set to reach 67 by 2028 at the latest.
Reports suggest that the Treasury considering bringing forward the time at which the state pension age is increased to 68.
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It is claimed the Treasury wanted this rise to the pension age to take place as early as 2035, in just over a decade’s time.
This will primarily affect those who are 54 as of today, with there being discussion of the change being implemented in 2034.
Increases to the eligibility age are based on life expectancy data in the UK and are carried out to help save money.
The retirement expert warned of the dangers that could arise from the Government going through with this retirement change.
Mr Cameron added: “The higher the state pension age is, the more difficult it will be for some people to remain in work till then, increasing the benefits of offering individuals the option of starting state pension earlier at a reduced level to make it cost neutral.
“An increase in the state pension age to 68 could also prompt the Government to increase the earliest age at which pensions can be accessed to 58.
“It tends to be set 10 years earlier than state pension age and is already increasing from 55 to 57 in 2028, creating massive complexities.”
Jeremy Hunt is set to announce the Government’s Spring Budget on March 15, 2023.
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