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State pension age to be increased to 68 from 2037

Work and pensions secretary David Gauke made the announcement in the House of Commons on Wednesday (REUTERS/Paul Hackett)
Work and pensions secretary David Gauke made the announcement in the House of Commons on Wednesday (REUTERS/Paul Hackett)

The state pension age will rise from 67 to 68 from 2037, bringing the change forward seven years earlier than was initially planned.

Work and Pensions Secretary David Gauke told MPs the Government was accepting the recommendation made in the Cridland review earlier this year.

The review, authored by former director-general of the Confederation of British Industry (CBI), John Cridland, looked at the key issues that drive state pension age changes including life expectancy, fairness, and long-term financial sustainability of the system.

The current state pension age is 65. The move is expected to 5.8 million people, particularly those between the ages of 39 and 47.

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Speaking in the House of Commons, Gauke said the measure was “about the government taking responsible action in response to growing demographic and fiscal pressures.”

“The approach I am setting out today is the responsible and fair course of action,” Gauke said.

“Failing to act now in light of compelling evidence of demographic pressures would be irresponsible and place an extremely unfair burden on younger generations.”

Gauke said that the change is equivalent to a saving of around £400 per household based on the number of households today. He added that it will save more than £250 billion by 2045/6, when compared to the Labour Party’s proposed plans to cap the state pension age at 66 until 2020.

Investment platform AJ Bell said the change was a necessary move, though Theresa May’s minority government was likely to face a battle to get the controversial measure through the House of Commons.

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“The government simply had to grasp the nettle on state pension reform. While improvements in life expectancy have stalled in recent years, over decades the state pension system has become increasingly unaffordable. To put it simply, people are living a lot longer but the age at which they receive the state pension has barely moved in over a century. Failing to address this now would only store up problems for future generations,” said Tom Selby senior analyst at AJ Bell.

“The government could well face a serious battle to get this unpopular measure through the House of Commons, however. Labour has already indicated it will oppose such reform and, with a wafer thin majority, only a few rebellious MPs would leave the plans on a political knife edge.

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Selby added that it “would be hugely irresponsible” for the government not to address the issues of affordability and the UK’s ageing population.

However, Steven Cameron, pensions director at Aegon, noted that the government’s decision was “ironic”, made just days after Sir Michael Marmot’s review showed improvements in life expectancy had halved, meaning the increase “may be less justified on affordability grounds”.

“A blanket increase in state pension age will be particularly concerning for those who through health concerns, job pressures or lack of employment opportunity simply can’t keep working into their late 60s,” he said.