State Pension could suffer a ‘dramatic’ change, as the qualifying age may potentially reach 70 within five years. The potential increase will have devastating results, impacting millions of prospective pensioners in the near future. This ‘dramatic’ change is being considered as one of the only promising viable solutions to keep the entire pension system afloat. Discover why the increase in State Pension age could be moved to a higher qualifying age much sooner than anticipated by the original timeline.
The average modern person is living longer
A century ago, the average life expectancy for people living in the UK was significantly lower than it is now. Figures from the Office for National Statistics revealed that the average life expectancy at birth differed from the life expectancy of someone who survived infancy and childhood due to significantly high mortality.
The average life expectancy of a century ago was:
- 51 years for a newborn boy
- 55 years for a newborn girl
Today, we are fortunate to have access to improved sanitation and advanced medical technology and research, which have contributed to a much higher average life expectancy for the modern person. From 2022 to 2023, the average life expectancies were recorded as:
- 87 years for a newborn boy
- 90 years for a newborn girl
While we celebrate having our loved ones in our lives for longer, it has resulted in some financial complications, which is why the State Pension could soon suffer a ‘dramatic’ change.
State Pension could suffer ‘dramatic’ change
It has already been confirmed that the State Pension age will rise in 2026, marking the end of the era of retiring at age 66. Now, a new Government pensions review is being considered to increase the qualifying age much higher and much sooner. The pensions review is underway due to the increase in the average life expectancy and the annual cost of the State Pension for the government.
According to the official statement from the UK Government, the current new State Pension rate is £230.25 weekly. As the Triple Lock ensures an annual increase to the weekly rate, it could result in the government paying nearly £200 billion annually by 2073. According to Rachel Vahey, AJ Bell’s head of public policy:
“This latest state pension age review, however, may eventually force the government’s hand.”
What to expect from the pensions review
There are many speculations as to what the pensions review may reveal as the best solution to the problem. Some believe the qualifying age will increase to 70 within the next five years. Ms Vahey added that one option may be to increase the state pension age more quickly. However, she said that:
“Although the elephant in the room is that the state pension age is just one lever government has to help manage the cost of the state pension – the other is reforming the triple lock.”
Partners at pension consultant LCP, Webb and McDonald, argue that the State Pension age must be reformed in such a way that allows people to expect to receive a pension for a set period, for example, 20 years. This will enable the government to manage the system’s funding on a more stable basis. They added that the retirement period would remain the same, but people’s working lifetime and pension contributions would be longer.
Fortunately, the UK Government confirmed that the Triple Lock guaranteed boost will continue as is indefinitely. This means that the only changes could be to either move the pension age increase timeline forward or implement a system where people can benefit from a pension for a set retirement period. Only time will tell what reforms the pensions review may bring forward in the future. As the country waits in anticipation, we recommend getting all your financial affairs for retirement.
Disclaimer: This content is informational only and does not supersede or replace the Department for Work and Pensions’ or HMRC’s own publications and notices. Always verify any specific dates and amounts by following the direct links in our article to the institutions or by consulting your local DWP field office or tax advisor.
