A finance expert has warned that Labour could raise the state pension age to 70 within the next decade. Kevin Mountford, co-founder of Raisin UK, said it “wouldn’t be surprising” to see proposals emerge for increasing the pension age to 69 or 70 years.
The stark warning comes as speculation mounts over potential changes to the pension system under a Labour government. During Chancellor Rachel Reeves’s Autumn Budget, she pledged to keep the triple lock on state pensions but made pension pots liable for inheritance tax (IHT) for the first time.
While analysts have claimed the Government will save money if the state pension age was raised, incomes for older Britons could take a hit if the threshold is increased earlier than expected.
“Given current trends and pressures, it wouldn’t be surprising if proposals emerged to increase the pension age to 69 or 70 years over the next decade, particularly if life expectancy projections stabilise,” Mountford told the Express.
The finance expert suggested such changes could have significant implications for pensioners who are already facing financial challenges. The state pension age currently stands at 66 for both men and women.
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Experts are warning the state pension age could be hiked sooner than expected
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Under existing plans, this will rise to 67 between 2026 and 2028. A further increase to 68 is scheduled between 2044 and 2046. However, Mountford warned that Labour could move to accelerate these planned increases.
“While the planned rise to 67 years by 2028 is already in motion, there’s now speculation about the Labour government potentially accelerating a further increase to age 68 – or even higher,” he said.
Such changes could allow the Government to generate an additional £6billion per year. Mountford stressed that raising the state pension age would particularly impact vulnerable pensioners.
“For many, especially those in lower-income or physically demanding jobs, delaying the state pension could result in significant financial and health challenges,” he warned.
The expert emphasised the need for careful planning if such changes were implemented. “If Labour does decide to push the pension age beyond age 67, it’s essential to have a well-thought-out transition plan, such as enhanced support for individuals nearing retirement who are already struggling financially,” he said.
He cautioned against prioritising short-term financial gains over societal equality. “The short-term fiscal benefits must not come at the cost of long-term societal inequality,” Mountford added.
Many pensioners are still grappling with recent changes, including modifications to winter fuel allowance. Research from the Institute of Fiscal Studies (IFS) has revealed concerning poverty rates among those approaching state pension age.
The data shows that poverty rates among people aged 63-65 are higher than any other adult age group. Around 26 per cent of those just below state pension age face poverty, compared to 21 per cent among those in their early 40s.
However, the IFS notes that this may not tell the complete story about living standards. The rate of material deprivation – measuring whether households can afford basic goods and services – is actually lower among the 63-65 age group at 16 per cent.
This compares to 19 per cent among the rest of the working-age population. The IFS acknowledges that raising the pension age helps manage public finance pressures from increased longevity.
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State pension age will rise to 67 by 2028 then it will further increase to 68 GETTYHowever, they warn this reduces average incomes of those affected, particularly impacting people already out of paid work before reaching state pension age. The report also identified groups particularly at risk of falling below the poverty line.
These include pensioners and people reaching retirement age who are privately renting. The report suggests potential support measures for those affected by pension age changes.
One option would provide extra support to those one year below state pension age and on universal credit. This would cost £600million annually and reduce poverty in around 30,000 households.
Alternatively, increasing support only to those receiving both universal credit and health-related benefits would cost £200 million yearly. This would help reduce poverty in 3,000 households.