Delaying the rise in the UK retirement age until 2044-46 risks costing the government more than £60billion, according to research by a leading think tank.
The statutory retirement age, now set at 66, is due to rise to 68 after 2044. The government wanted to postpone this increase to 2037-39, with the plan due to be confirmed in May, but it will now delay decision beyond next year’s electionaccording to officials.
However, in a report on Saturday, the Institute for Fiscal Studies said meeting the current deadline could cost the Treasury up to £9billion for every year the hike is delayed. Most of this would be “simply due to the payment of the state pension longer,” the think tank said.
“There are significant long-term fiscal challenges stemming from the ageing populationsaid Jonathan Cribb, Associate Director of IFS.
However, according to the most recent projections from the Office for National Statistics, life expectancy has fallen since 2016, when the data was used in the first independent review of the state’s retirement age.
For men, life expectancy at age 50 had fallen to 83.9 in 2020, from 85.6 in 2016. Over the same period, the figure for women fell to 86.7 from 88.1.
“This justifies postponing the increase in the legal retirement age. . . but it would cost money,” Cribb said.
According estimates According to the Office for Budget Responsibility, the independent budget watchdog, the state pension bill will rise from £110bn in 2022-23 to around £148bn by 2027-28.
From April this year, those eligible for the state’s new full pensions are set to receive £203.85 a week. The majority of retirement households derive more than half of their income from the state.
Additionally, the IFS noted that when the legal retirement age was last raised from 65 to 66 between 2018 and 2020, income poverty rates among 65-year-olds rose from 10% to 24. %.
“The government should consider what additional support should be provided to people on low incomes and those in poor health, in their mid-60s, when the state pension age increases further,” he said. .
The effects of further increases in the retirement age would depend on the size of the generations affected, the labor market’s response to the change and the level of the state pension, the IFS said.
France has been hit by riots on President Emmanuel Macron’s plan to raise the retirement age, while in the UK Tory MPs have called for a delay, arguing that ordinary voters would be unhappy to have to work longer after tax rules on pensions for the wealthiest people have been relaxed in the budget.
The Department for Work and Pensions said the government “is required by law to review the statutory retirement age regularly and the next review will be published by May 7”.