The government has deferred its decision on when to raise the State Pension age (SPA) to 68.
In the US drama series, The West Wing, the day before the parliamentary recess was referred to as “Take out the Trash Day”. On both sides of the Atlantic, this day marks an opportunity for the government to publish a flood of announcements, statistics and reports, safe in the knowledge that immediate scrutiny will be limited by the absence of politicians and the media’s difficulties in sifting through the sheer volume of information.
One of the 17 ministerial statements made on the day before parliament’s Easter recess concerned plans to raise the SPA to 68 (it will rise to 67 between 2026 and 2028). The Department of Work and Pensions (DWP) commissioned an independent review of the subject in December 2021 and an announcement had been expected for some time.
In the event, there was what might best be labelled a non-announcement. The government published its 40-page review alongside the 138-page independent review but did not reach a conclusion on when the SPA would rise from 67 to 68. Instead, the Secretary of State for Work and Pensions said the decision would only be made after another review, scheduled to happen “within two years of the next Parliament”. In other words, as happened in 2017, the issue has been kicked into the post-election long grass.
As the law currently stands, a SPA of 68 is due to be phased in between April 2044 and April 2046. The first independent review reported in 2017 had proposed bringing the schedule forward by seven years, largely in response to projections of improved life expectancy. Since then, life expectancy improvement has slowed significantly. One recent estimate is that the life expectancy of a man aged 65 in 2022 is about two years shorter than that of his counterpart from 2012.
The life expectancy data suggests that the phased approach during 2044–46 should remain but, as the Institute for Fiscal Studies has highlighted, that extra seven years could cost the government more than £60bn.
The saga of changing the SPA to 68 is a reminder that your retirement plans should not be overly reliant on your state pension.
The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.