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Pension age move to 68 could disrupt retirement plans

By Ben Riley-smith and Szu Ping Chan

THE pension age is to rise to 68 years even earlier than planned, under Government proposals.

The age at which Britons qualify for their state pension is due to increase to 67 by 2028 and then 68 by 2039, but ministers want to bring the latter rise forward to the mid-2030s.

It would mean people who are in their mid-50s now will have to wait an extra year before drawing their pension, potentially disrupting retirement plans. However, the move will raise tens of billions of pounds for Treasury coffers and has been described as a “big bazooka” as officials look to secure the country’s long-term finances.

It paves the way for people starting work today to have their retirement delayed until they are in their 70s.

Supporters argue it would be justified to boost inter-generational fairness, given how much life expectancy in the past decade has risen, while also helping to fund higher public spending.

Critics are likely to question whether the move will cause disruption to those already planning for retirement and raises the risk of an elderly voter backlash.

There is growing interest in Whitehall in automatically linking changes in the pension age to life expectancy, with a belief that it could help depoliticise the issue. The concept has been explored by ministers and officials and could see a link pinned on people spending around a third of their lives retired.

The Daily Telegraph has talked to half a dozen current and former government figures involved in pension-age discussions in recent months. While no final decision has been made, it is clear successive Tory governments have bought into the argument that the pension age should rise to 68 before 2039.

When she was prime minister, Liz Truss dubbed it a “silver bullet” and initially wanted to announce it in her minibudget, according to sources involved.

The age at which people get their state pension has been a controversial topic for the Conservatives since they took office in 2010.

The drive to equalise when men and women receive their pensions triggered

a fierce backlash from a group which became known as the “Waspi women”, which stands for Women Against State Pension Inequality.

Within government there is an ongoing debate about when the pension age should rise to 68. Under the current law it will hit 68 by 2046, though existing policy is that it should happen by 2039. However, ministers and officials involved in the decision-making under Boris Johnson, Ms Truss and now Rishi Sunak have been inclined to pull the date forwards, sources say.

Multiple current and former government figures told The Telegraph a date of the mid-2030s was widely favoured for the rise to 68 but it could be even sooner.

The Treasury savings could be around £10billion, according to analysis by pension experts. The LCP consultancy estimated around £8 billion would be saved in pension payments and £1.3billion in taxes on extra earnings, though that could be higher.

George Osborne, the former chancellor who oversaw a rise in pension ages, once remarked on how relatively easy, politically, it is. “I’ve found it one of the less controversial things we’ve done and probably saved more money than anything else we’ve done,” he was quoted saying in 2017.

There is a formal process ongoing for recommendations which sees two reviews submitted to the Department of Work and Pensions before a decision with the Treasury. One independent review, led by Baroness Neville-rolfe, has been handed in. Another, written by the Government Actuary’s Department, is expected this autumn.

It was announced in this month’s Autumn Statement that the review of

the state pension age will be published in “early 2023”. Announcing a rise in the pension age earlier than expected at next spring’s Budget would allow the Treasury to argue it is taking hard decisions to improve state finances.

That may help reassure the markets about fiscal prudence but it would not help to balance the books, as the financial benefit only comes in the 2030s.

Legislating for a quicker age rise could be tricky, however, given that pensioners form a key voting block for the Conservatives. MPS are split after a year of in-fighting and the next election is looming.

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Daily Telegraph