State Pension Age Acceleration - Worst Case Scenario

dothenumbersaddup

Hi, at present the state pension age moves to 67 from 2028, but no further increases have been announced until 2040. I can see the move to 68 and beyond being brought forward, and wondered what the worst case might look like?  Could it be increased to 68 in 2029, 69 in 2030 and 70 in 2031 for example?

hugheskevi

State Pension is a benefit with the rules set out in legislation. This statement is not intended to be provocative, but is necessary because if State Pension was a property right or contractual right as so many incorrectly believe, the Govt of the day would be unable to make changes without complex changes to contract law or protection of accrued rights. Therefore if the Government of the day decides to make a change to State Pension age and commands a majority vote in the Commons and the Lords it can make whatever changes it wishes, whenever it wishes.

The increase from age 66 to age 67 is legislated to happen between 2026-28 and the increase to 68 is legislated to happen between 2044-46. No further increases are currently legislated. However, the previous Government repeatedly favoured bringing the increase to 68 forward to 2037-39 but did not legislate for the change. 

The last review of State Pension age in 2023 was inconclusive, and the Conservative government said another review would take place within 2 years of the next Parliament, ie, 2026. However, reviews only have to take place every 5 years under legislation, so the current Govt. may not want to have a review until 2028 (or might change the legislation around reviews).

In practice, it is very unlikely increases would be introduced with less than 10 years notice, given the strength of opposition and lobbying to previous increases. The current Govt has not indicated what its views on State Pension age might be, and these may not be voiced until the next review of State Pension age is responded to by the Govt. Taking into account the lack of Govt position, the timing of the next review, past Govt position, and desire for at least 10 years of notice of change, it is unlikely the increase to age 68 would be brought forward to earlier than 2037-39.

It is worth noting that there will be a reluctance to increase State Pension age to 70, and certainly beyond, as that would create difficult media headlines. Also, although State Pension is alleged to be linked to longevity, the Govt determines the proportion of life they think appropriate that people should spend above State Pension age. This lets the Government determine whatever outcome they wish, with a veneer of analysis and impartiality around changing life expectancy.

p00hsticks

dothenumbersaddup said:

Hi, at present the state pension age moves to 67 from 2028, but no further increases have been announced until 2040. I can see the move to 68 and beyond being brought forward, and wondered what the worst case might look like?  Could it be increased to 68 in 2029, 69 in 2030 and 70 in 2031 for example?

Although I think it theoretically possible, I can't imagine it ever being escalated that quickly or with such a short amount of notice - governments have learned their lesson there after previous changes, hence the current commitment to give at least ten years notice of changes.

hugheskevi

p00hsticks said:

dothenumbersaddup said:

Hi, at present the state pension age moves to 67 from 2028, but no further increases have been announced until 2040. I can see the move to 68 and beyond being brought forward, and wondered what the worst case might look like?  Could it be increased to 68 in 2029, 69 in 2030 and 70 in 2031 for example?

Although I think it theoretically possible, I can't imagine it ever being escalated that quickly or with such a short amount of notice - governments have learned their lesson there after previous changes, hence the current commitment to give at least ten years notice of changes.

While I don't disagree, I think it is important to recognise that commitments such as giving at least 10 years of notice for State Pension changes ended when the Govt that gave that commitment was voted out of power, and so is not a current commitment. Commitments only endure if passed into legislation.

Similarly, the intention to set minimum pension age 10 years behind State Pension age ended when the last Govt was voted out. 

The promise of 25 years of no change to public service pensions ended when the Coalition govt. that made that pledge finished, albeit leaving the legislative requirement for consultation with a view to reaching agreement with member representatives should a protected element be changed before 2040 (other than if a cost cap or floor breach occurs) that provides some reassurance about future change.

The current Govt may well share such ambitions, but it should not be assumed this is the case and it is important to distinguish what is a legislative obligation (eg review State Pension age by 2028), a stated objective/commitment of the current Govt (eg retain Triple Lock this Parliament), and something a previous Govt once intended (eg 10 years notice of change to State Pension) as these all give varying degrees of certainty about future change.

Marcon

dothenumbersaddup said:

Hi, at present the state pension age moves to 67 from 2028, but no further increases have been announced until 2040. I can see the move to 68 and beyond being brought forward, and wondered what the worst case might look like?  Could it be increased to 68 in 2029, 69 in 2030 and 70 in 2031 for example?

The worst case is the state pension is abolished tomorrow! Will that happen? Of course not.

There's really not much point speculating on what might or might not happen, let alone try to plan for it. As said above:

hugheskevi said:

....I think it is important to recognise that commitments such as giving at least 10 years of notice for State Pension changes ended when the Govt that gave that commitment was voted out of power, and so is not a current commitment. Commitments only endure if passed into legislation.

Similarly, the intention to set minimum pension age 10 years behind State Pension age ended when the last Govt was voted out. 

The promise of 25 years of no change to public service pensions ended when the Coalition govt. that made that pledge finished, albeit leaving the legislative requirement for consultation with a view to reaching agreement with member representatives should a protected element be changed before 2040 (other than if a cost cap or floor breach occurs) that provides some reassurance about future change.

The current Govt may well share such ambitions, but it should not be assumed this is the case and it is important to distinguish what is a legislative obligation, a stated objection of the current Govt, and something a previous Govt once intended as these all give varying degrees of certainty about future change.

Not sure much can usefully be added to this well informed and balanced answer.

MacPingu1986

dothenumbersaddup said:

Hi, at present the state pension age moves to 67 from 2028, but no further increases have been announced until 2040. I can see the move to 68 and beyond being brought forward, and wondered what the worst case might look like?  Could it be increased to 68 in 2029, 69 in 2030 and 70 in 2031 for example?

The likelyhood of accelerating increases over such short a timescale are so remote and minimal that I think we can say with confidence they will not happen.

Increases to the state pension age (or accelerating the time of increase) happen with very long (10ish years per year of change) notice of lead times. It's also important to bear in mind that although the dependency ratio does continue to increase, life expectancy in the UK has now been static for the past decade.

The next increase to the state pension age to 67 takes place in 2028 (originally 2036) - brought in by the Pension Act 2007 so still 21 years notice with acceleration. The following increase to 68 is scheduled for 2046 - it's likely this will be moved forward to 2037-39 but with no firm plans yet and the government has delayed any changes pending further review. Again - decades of notice.

We obviously don't know what the future holds, but *if* (and we need to bear in mind this is a big *if* given the flatlining of life expectancy) there are going to be further increases to the state pension age to 69 and 70, a realistic "worst case scenario" in my view would be for the increases, even with acceleration, to come in to effect in the mid 2040s and mid 2050s respectively. 

Stubod

..and they could always consider leaving the age limit alone and introduce means testing it instead...

QrizB

Stubod said:

..and they could always consider leaving the age limit alone and introduce means testing it instead...

Rather than the "graduate tax" for student loan repayments, a "granny tax" for all those wealthy pensioners?

I'll drop Rachel an email about it ...

DRS1

QrizB said:

Stubod said:

..and they could always consider leaving the age limit alone and introduce means testing it instead...

Rather than the "graduate tax" for student loan repayments, a "granny tax" for all those wealthy pensioners?

I'll drop Rachel an email about it ...

It is easy -just abolish the state pension and use pension credit instead.

Stubod

..that'll be a great vote winner!!......

hugheskevi

There is also an interesting dynamic now with public service pensions in relation to State Pension age - any increase to State Pension age is a reduction to the value of public service pensions due to the link between Normal Pension age and State Pension age.

I suspect the current Govt may place a different weight on this dynamic than the previous Govt may have attached to it.

Assuming a 10+ year notice period, that means annoying a lot of people - possibly a large number who may vote for you - for something that will not benefit an incumbent party either in the current or even the subsequent Parliament.