Government proposals to link the pension age to life expectancy could force a person in their mid-twenties to wait until they’re 75 to pick up their state retirement benefits, experts warn.
In a surprise Budget announcement Chancellor George Osborne (pictured) said the Government would seek a “more automatic mechanism” for increasing state pension ages in the future by linking the figure to life expectancy.
The Budget document says policymakers are considering undertaking a “regular independent review” of longevity changes to ensure costs are spread “fairly” between generations. The Government has already announced an acceleration in the state pension age for both men and women to 66 by April 2020.
Standard Life head of pensions policy John Lawson says: “This will hit young people the hardest. A 25-year old might not receive their state pension until they’re 75 under this system.
“It’ll mean that people, particularly young people, will have to take a real reality check because a lot of people won’t realise how long they’ll have to wait until they retire.”
Hargreaves Lansdown pensions analyst Laith Khalaf says the Government will should ensure people approaching retirement are given a degree of certainty about their retirement age.
He says: “It’s a fairly sensible measure in terms of taken account of rising life expectancy, but the concern I have is that people won’t have certainty about what their state pension age will be. If people don’t know when they can draw the £140 a week state pension that adds uncertainty to the system.”