December 6, 2013
Young Brits told they have to work until 70
Young UK workers can expect a long working life following Chancellor George Osborne’s announcement that the state pension age will increase to 70.
Part of a long-term plan to save £500 billion over the next 50 years, the reform was announced on Thursday in the half-yearly statement about the UK economy. Increasing the state pension age to 70 by 2060 follows previous announcements that it will rise to 66 by 2020 and to 67 by 2028.
The Chancellor announced that someone in their 40s won’t get their state pension until they are aged 68; the linkage to life expectancy is likely to mean someone starting work now will have to wait to age 72, and a child born today is unlikely to receive their state pension until they reach 77.
Despite the current planned increases, the number of people of state pension age is likely to increase by 31 per cent from 12.3m last year to 16.1m by mid-2037, according to the Office for National Statistics.
Many have argued that state pension age must increase at a faster rate than planned to keep up with rapidly rising longevity.
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “This was always going to happen, it was just a question of how and when it was unveiled.”
But some businesses argue that having 70-year-olds on their workforce could prevent younger people from getting jobs and that an elderly workforce could impact productivity.
The Government is creating legislation for a new state pension age framework, meaning that the state pension age will be reviewed every Parliament.
The Department for Work and Pensions is to publish more detail about how this principle will work in practice.
Astrid Yarwood, Compliance Service Director at Moorepay, said: “The increase in the state pension age should be a wake-up call for employers. It shows that they need a retirement strategy just as much as a pension strategy.”
We’ll keep you updated as we find out further details on the impact to employers.