State pension age could rise to 74 by 2060, when there could be more than a million people over 100 years old, population projections by the Office for Budget Responsibility suggest.
The trend means today’s 30-year-olds face an ‘unrecognisable’ old age, according to Royal London director of policy Steve Webb, with working life extended considerably and pensions paid from a far older age.
The OBR says that under the ‘old age variant’, a set of projections based on assumptions of low fertility, low immigration and high life expectancy, the state pension age rises to 74 in the 2060s on the basis of the principle set by government that it should be payable for no more than one third of life.
More modest assumptions published by the Department for Work and Pensions last week show, state pension age will rise to 69 for those in their mid 30s and below.
The Government’s independent reviewer of state pension age, Sir John Cridland, is expected to publish his recommendations in March. The Government will then take account of his assessment together with the latest longevity estimates from the Government Actuary’s Department before recommending a new schedule of state pension ages. Current legislation provides for state pension age to reach 66 in 2020, 67 by 2028 and 68 by 2046. It is widely expected that the new recommendations will, for the first time, give a provisional date for state pension age to rise to at least 69, and current DWP assumptions are that this will be in the early 2050s. Under the 2015 Pension Act, a similar review has to be undertaken every five years, and an individual’s state pension age will only be finalised when they are ten years from state pension age.
Webb says: “Our society could be completely transformed in a generation in ways that we can barely imagine and for which we are totally unprepared. It is clear that the Government has already built in an assumption of a pension age of 69 for today’s under 35s, but pension ages could rise much further and faster. A world where we cannot get a pension until we are 74 and a million people have celebrated their 100th birthday would need a total re-think of our approach to work, savings, health and care.
“The Government needs to do much more to give younger workers in particular a more realistic picture of what their later life could look like.
“The old age experiences of today’s younger workers are likely to be unrecognisable from those of their parents and grandparents. The only people who have choices about when they retire will be those who have a significant pension or other assets of their own and are therefore not dependent on the age at which state pension becomes payable”.