Britons will have to work for longer before claiming the state pension under plans to save the government billions of pounds by raising the official retirement age to 68 sooner than initially planned.
The present threshold of 66 will increase to 67 in 2028 and is due to hit 68 in 2046. However, ministers are looking at bringing forward the change to as early as 2035, affecting those who are 54 and under today.
An announcement is expected by Jeremy Hunt this year. The Sun, which first reported news of the discussions in Whitehall, said the chancellor favoured raising the retirement age to 68 in the mid-2030s but that Mel Stride, the work and pensions secretary, was pushing for 2042.
Last month the government began a statutory review of the state pension age, with findings to be published in May. Ministers believe the changes are necessary to make pensions affordable to the taxpayer given the ageing population. The last rise saved the Treasury about £5 billion.
Critics said the move would disrupt the plans of those already planning for retirement and could alienate voters at the next election.
The pension age was 65 for men and women in 2018. It is gradually rising to 67 by 2028. Under the present law it will hit 68 by 2046, although government policy is that it should happen by 2039. Ministers want to leave at least ten years between any change and its implementation, so 68 could be the retirement age as early as 2033.
Raising the state pension age saves the Treasury billions of pounds. Putting it at 68 a year earlier would spare the taxpayer about £10 billion, according to analysis by pension experts. LCP, a pensions consultancy, estimated that about £8 billion would be saved in state pension payments and at least £1.3 billion would be raised in taxes on extra earnings.
The move comes as Britain’s largest broker estimated that just one in three high earners with household income above £100,000 are on track to afford a comfortable retirement lifestyle.
Fewer than one in seven households are on track to afford a comfortable lifestyle in retirement, according to Hargreaves Lansdown, Britain’s largest broker. Even for households earning £100,000 a year the figure is one in three.
Comfortable retirement is defined by the Pensions and Lifetime Savings Association, an industry body, as requiring an annual income of £54,500 for a couple. It would cover two foreign holidays a year and up to £1,300 per person for clothing.