Work Until Mid-70s Warning Amid Pensions Review

Workers starting out today have been warned they may have to wait until their mid-70s before they can start drawing their state pension.

The state pension age has been undergoing changes since 2010 so that its long-standing level of 60 for women will equalise with men at 65. From 2018 it will rise for both and reach 67 by 2028 under Government plans.

But there are warnings this could further rise as a consequence of a Government review, which will consider changes in life expectancy and wider changes in society and aim to ensure that the state pension "remains sustainable for generations to come".

Former CBI director general John Cridland will lead the review.

It (Other OTC: ITGL - news) comes as a number of expert reports separately raise the prospect of people having to "work until they drop" because they are not putting enough money aside for themselves.

Pensions minister Baroness Altmann said: "As our society changes, it is only right that we continue to review state pension ages and take into account the relevant factors to make sure that the state pension is sustainable and affordable for future generations."

Financial services firm Hargreaves Lansdown (LSE: HL.L - news) said further changes were likely to mean it goes up faster than currently planned.

Tom McPhail, head of retirement policy at the firm, said: "Those joining the workforce today are likely to find themselves waiting until their mid-70s to get a payout from the state system."

The 2014 Pensions Act requires the state pension age to be reviewed during each Parliament. This will be the first such review to take place.

It will not cover the existing timetable for changes up to April 2028. Mr Cridland will report in time to allow the Government to consider the recommendations by May 2017.

Meanwhile, research from Royal London found that people making minimum workplace pension contributions from the age of 22 would need to work until 77 to be able to enjoy the sort of "gold standard" pensions enjoyed by many of their parents' generation.

This varies across the country due to different wage levels so that it would be as high as 81 in Westminster.

Former pensions minister Steve Webb, director of policy at Royal London, said: "It is great news that millions more workers are now being enrolled into workplace pensions, but the amounts going in are simply not enough to give people the kind of retirement they would want for themselves."

Another report, the Labour-commissioned Independent Review of Retirement Income, warns that people need to be saving 15% of their salary now to build up a reasonable pension pot - compared to 8% in the past.