The UK will need to increase its state pension age to 71 by 2050 if it is to maintain a healthy ratio of workers to retirees as the population ages, a report has recommended.
Think-tank the International Longevity Centre (ILC) found the state pension age, which is currently 66 but will rise to 67 from 2027, might need to hit at least 70 by as early a 2040 to maintain the current dependency ratio of retirees drawing their state pension to tax-paying workers.
However, if the proportion of the economically-active population were to increase from the current 78% to 85%, the ILC said it “may be possible to hold the state pension age at below 70 from 2040 – at least for a few years”.
It defined the working adult population as people aged 20 to 64 years, to account for time spent in full-time education.
State pension age increase
Minister encourages employers to offer ‘midlife MOTs’ to retain older talent
The ILC’s Healthy Ageing and Prevention Index ranked 121 countries against six indicators: life span, health span, work span, income, environmental performance, and happiness. The UK ranked 16 on the index,
Countries that ranked at the top of the index have rapidly ageing populations, including Switzerland (1), Iceland (2), Norway (3), Sweden (4) and Singapore (5).
The ILC said encouraging people to work for longer would be needed to adapt to an ageing society, as well as a greater focus on preventing ill health from an early age through to adulthood.
“Policymakers can no longer ignore the impact of poor health on wider society and doing so will simply make wider policies related to work or pensions ineffective,” the report says.
Becky O’Connor, director of public affairs at online pension provider PensionBee said the prediction was “alarming”.
“People depend on the state pension for a significant chunk of their retirement income. It’s also key to confidence in people’s ability to retire at all. Even the suggestion that people won’t get it until their 70s will make people feel more distrustful than they already do in the state pension system and may cause actual worry and anxiety about their future,” she said.
“If people suffer ill health or face the need to care before 71, as is likely for many, they may have to give up work sooner than they can receive their state pension anyway and have to claim working age benefits for longer instead.”
PensionBee research found that 48% of UK savers do not think they will be able to retire before the state pension age if it is increased to 68, as projected between 2044-2046.
“Given these findings, it’s reasonable to anticipate even more people would be forced to work for longer if the state pension age rises to 71 by 2050, as suggested by the International Longevity Centre,” said O’Connor.
“There’s also a risk that people could use up too much of their private pension savings early in retirement if they had to stop work before State Pension age, possibly leading to greater poverty in later old age.”
Lily Megson, policy director at retirement advice service My Pension Expert, suggested that a focus on financial planning could mean employees would still be able to retire earlier.
She said: “Entering your seventies with retirement but a blip on the horizon is a sobering thought for many – yet a very tangible reality that millions will face in years to come. After decades with their noses to the grindstone, don’t Britons deserve more support and appreciation?
“Although this may feel disheartening to many, it needn’t crush people’s dreams of a comfortable retirement beginning at whatever date they see fit. Diligent financial planning can make this possible – in other words, taking stock of pension products and investments, and engaging with independent financial advice to create a robust retirement plan where necessary.
“Where the government must intervene is facilitating this support and providing the necessary tools to help make this happen for Britons.”
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Reward, compensation and benefits opportunities
Browse all comp and benefits jobs
