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A new report claims that the UK’s state pension age (SPA) will need to hit 71 by 2050 to keep up with longer life expectancy, significantly accelerating the current timetable of increases.
The International Longevity Centre (ILC) report also suggested that SPA rises may need to go up even quicker to deal with the number of people in the UK out of work because of long-term health conditions.
Under current plans, the SPA will rise from 66 to 67 between 2026 and 2028 before rising again to 68 after 2044.
According to the ILC report, this rate of change is likely to be too slow if the UK wants to maintain its current ratio of workers to state pensioners. It suggested that the SPA should hit 70 or 71 before 2050 to solve this problem.
The report also highlighted that the growing number of UK workers out of work with long-term health problems since the Covid-19 pandemic complicates the picture further.
‘While we are facing ill health earlier in our long lives, the problem becomes even more pressing because of the exit of workers from the workforce long before they reach state pension age as it reduces the tax base to pay for pensions,’ the ILC report said.
‘Poor health is one of the key reasons for this and is one of the greatest barriers to economic prosperity faced by the UK today because it lowers economic output and increases taxes. Additionally, a smaller working population and a large economically inactive population create huge labour shortages which must be filled by migrant labour which creates additional problems.’
Any changes to the SPA are likely to be unpopular, making government action unlikely in the short term. Last year the government delayed a decision on increasing the rate of change to the SPA until after the next general election, following protests in France against hikes to the retirement age.
At the time of the delay, the government also cited reductions to life expectancy following the Covid-19 pandemic. The ILC report noted these reductions, but warned they would not be a long-term trend to stop SPA changes.
‘The recent stalling in life expectancy during the austerity years and Covid has temporarily eased the pressure for increases in state pension age beyond 67 after 2027 but longer-term the pressure will be on to increase it to 68 or 69 before that,’ it said.
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