LONDON — Up to 30 million people may have to wait an extra year before receiving their state pension under part of a major pension age review, according to the Department for Work and Pensions (DWP).
The change would mean that people due to retire in 2028 or after must work a year longer before they are eligible for a state pension — a move which would affect all those currently under the age of 54.
The UK retirement age is currently 63 for women and 65 for men, but that is due to be equalised at 65 by 2018. The pension age is then set to rise gradually as the population ages, and the government seeks to make its pension provision fiscally affordable.
Currently pension ages are set to start rising above 67 in 2039, but the proposed change would see pension ages start rising from 67 in 2028 instead.
According to the Telegraph, the government reportedly believes that pushing back the pension age for those not due to retire for over a decade is a “politically painless” way of saving money, as cuts “feel a long way off.”
The Telegraph estimates that shaving off 12 months’ pensions entitlement from a projected 30 million people at £8,000 per person would represent a £240 billion saving for the Treasury.
Richard Harrington, the pensions minister, said in a statement that it was important to make the state pension “sustainable” at a time when pensions are costing the government more than ever. The government spent over £100 billion on pensions last year, and that will increase significantly as the population ages.
Official statistics show that is happening quickly. 23% of the population were over 60 last year, and that is due to increase to 30% by 2039.
Harrington said: “People are living and working longer than ever before, that is why it is important we get this right to ensure the system stays fair and sustainable for generations to come.
He added: “As set out in the Pensions Act 2014, the report from the Government Actuary complements John Cridland’s independent report on State Pension age, announced in March, and both will inform the Government’s first review of State Pension age.”
The proposed change is one of two scenarios being considered by the government — the other alternative would see no change to the formula, which currently dictates that adults should spend 33.3% of their adult life in receipt of a state pension, based on adult life starting at 20.
The results of the pension review will be published in May 2017.
Business Insider Emails & Alerts
Site highlights each day to your inbox.