A faster increase in state retirement age may be needed to fund a universal basic state pension.
The Department for Work and Pensions is expected to publish a green paper in November outlining proposals for a £140 a week universal pension for future retirees. However, the Government has yet to spell out how the reform will be funded. The plan, was dropped by the LibDems in advance of the election because it was deemed too expensive.
Hargreaves Lansdown pensions analyst Laith Khalaf says a further acceleration of the planned increase in the state pension age, which is due to hit 68 in 2046 under the previous administration’s proposals, could balance the DWP’s books.
He says: “We may get some kind of quid pro quo, with a more rapid increase in the state pension age in return for a better state pension when you get there. Lord Turner has suggested 70, the Institute of Directors has suggested 70. It would not be surprising if that is where we are in the not too distant future.”
In 2004, the CBI suggested increasing the state pension to the level of the pension credit, paid for by a rise in the retirement age to 70 between 2020 and 2030.
Standard Life head of pensions policy John Lawson says bringing forward the policy today would cost around £25bn. He suggests the reforms are likely to be implemented gradually.