State pension age is to rise to 68 for those in their forties and to 69 for those in their early thirties, the Chancellor George Osborne confirmed today in his fourth Autumn Statement.
His statement raises the prospect of a further rise in the state pension age – to age 70, for those who are currently at the start of their working life.
Live longer, work longer
State pension age (SPA) is already rising, from 60 for women and 65 for men, to 65 for both men and women by 2018, and 66 for both by 2020. A further increase is scheduled, to 67 in 2028.
The background to these rises is increasing life expectancy, from birth and at age 65. Figures from the Office for National Statistics show that:
- Life expectancy from birth for men is currently 79.1
- Life expectancy from birth for women is currently 82.9.
- The number of people aged 90 or more has tripled over the last 30 years
- This has increased from around 150,000 in 1982 to 465,500 in 2012
Today, Mr Osborne signalled the timetable for further increases in state pension age. It will rise to 68 by the mid-2030s and to 69 by the late-2040s. Outlining the changes, he said: ‘We think a fair principle is that, as now, people should expect to spend up to a third of their adult life in retirement.
‘The exact dates will be set by the future statutory reviews and in line with the most up to date demographic data, of which the next update is published next week.
State pension age seems likely to continue rising as people live longer. By the 2050s it could climb to 70 – the threshold for Old age pensions when they were first introduced in 1908.
Go further: State pension explained– find out more about how the state pension works
State pension increase for 2014
The Chancellor confirmed that basic state pension will increase by £2.95 in April 2014, from the current £110.15 to £113.10 per week.
This 2.7% rise is in line with the Coalition’s ‘triple lock’ guarantee, whereby basic state pension increases in line with the higher of prices, wages or 2.5%. The CPI increase for September 2013 was 2.7%.
Go further: How much state pension will I get?– check your pension entitlement
Single-tier pension from 2016
The government has already proposed a new single-tier state pension system, to begin in 2016. This will replace the current system, which combines flat-rate basic state pension with earnings-related additional state pension (SERPS/S2P). It is thought to be worth £144 a week in today’s money.
Those who reach state pension age before 2016, or have already reached state pension age, will continue to receive state pension under the current rules. Mr Osborne today said that these individuals would be able to top up their entitlement by making additional voluntary National Insurance contributions.
The cost of these additional National Insurance contributions will be set out in a future piece of legislation.
Go further: National Insurance explained– how paying NI builds up pension entitlement