Increase in state pension age from 66 to 67 is scheduled for between 2026 and 2028

The government has launched its third statutory review of the state pension age.

Led by Dr Suzy Morrissey and required under the Pensions Act 2014, the review will assess whether the current rules around pensionable age remain appropriate in light of the latest life expectancy trends, generational fairness, and fiscal sustainability.

A separate report from the Government Actuary’s Department (GAD) will also consider the latest demographic and economic data.

An increase in state pension age from 66 to 67 is already scheduled for between 2026 and 2028, with a rise to 68 currently pencilled in for 2046. However, the 2023 review under Baroness Neville-Rolfe recommended this be brought forward to between 2041 and 2043.

AJ Bell head of public policy Rachel Vahey said: “An increase to state pension age from 66 to 67 is already slated to happen between 2026 and 2028. But it’s less clear what will happen after that.

“There is also an increase to age 68 pencilled in for 2046, but a faster increase is definitely on the cards. The first two reviews of the state pension age advocated bringing this forward, but successive governments have treated the issue like a hot potato.

“This latest state pension age review, however, may eventually force the government’s hand.”

She added that state pension benefits are one of the single biggest expenses for the Treasury and account for “more than 80% of the £175bn pensioner welfare bill”.

“Without policy intervention, state pension costs are set to spiral to nearly 8% of GDP over the next 50 years based on the current trajectory, up from 5.2% today,” explained Vahey.

“The second state pension age review in 2023 recommended that the increase to 68 should be introduced between 2041 and 2043 to help reduce costs, although the government under Rishi Sunak opted not to commit to that timetable.

“However, the new Labour government may feel it needs to consider the rise to age 68 more closely, particularly if it wants to demonstrate steps toward long-term fiscal prudence.”

Vahey said the new state pension age review will look at key factors such as linking state pension age to life expectancy, its fairness between generations, as well as its role in ensuring the state pension’s long-term sustainability.

“An ageing population places an increasing burden on taxpayers, with state pension costs rising and fewer working age taxpayers to cover the cost. Future governments will hope that an improved economy and growing tax receipts will help alleviate some of the pressure. But that can’t be guaranteed and there needs to a be a credible plan for maintaining affordability,” she added.

“One option is to raise the state pension age higher and faster than currently planned. Although the elephant in the room is that state pension age is just one lever government has to help manage the cost of the state pension – the other is reforming the triple lock.”