Posted: 03 / 03 / 2017
MPs have warned that the state pension age may have to rise above male life expectancy in poorer areas of the country, in order to pay for the increase in pension payments.
Keeping pensions ‘triple lock’, which guarantees state pensions will always rise by at least 2.5%, could see a push in retirement age past life expectancy. This means the age at which people can stop working will have to rise to sustain the increases. Chancellor Philip Hammond has indicated that while the Government are committed in keeping ‘triple lock’ for the rest of the current parliament, it will review its future after 2020.
This news raises the prospect of males in poorer areas of the country working all their lives and never receiving their state pensions. However, those in wealthy neighbourhoods will still be able to benefit from higher state pensions for many years after retirement and the male life expectancy in the Westminster, London is 92.9 years.
Our Chartered Financial Planner, Gareth Rose, says:
It is somewhat inevitable that the state pension age will rise. With people living longer and the current system unaffordable for the Government they need to look at ways to reduce payments. The can only do this in one of two ways, decrease the amounts paid, or the time they pay it for.
Decreasing the amounts paid would almost certainly cause an uproar amongst pensioners and lose the political party that did so votes, so not really a valid option. So we are left with decreasing how long benefits are paid for. There is no way to cap the maximum age so we are left with the inevitability that state pension age will rise, and will continue to do so.
According to the Commons Work and Pensions Committe and figures from the Institute for Fiscal Studies, pension age would have to rise to the age of 70.5 by 2060. This exceeds the current average male life expectancy in 26 areas in England, including, Manchester, Leicester, East London and the Wirral, as well as 162 neighbourhoods in Scotland.
The committee chairman, Frank Field said: ‘With the ‘triple lock’ in place, the only way state pension expenditure can be made sustainable is to keep raising the state pension age.’
If you have any questions on this matter, and would like to speak to an expert to provide some guidance and advice, get in touch.