The Institute for Fiscal Studies (IFS) has cautioned that the state pension age in the UK would need to be raised to 74 by 2069 to sustain the triple lock guarantee, as per a recent report. This warning arises from concerns over the affordability of the government policy due to an aging population.
Currently, the state pension age for individuals retiring is 66 and gradually increasing to 68. The triple lock mechanism ensures that the state pension increases each April by the highest of inflation, wage growth, or 2.5%. However, without adjustments to the state pension age, the IFS projects that sticking to the triple lock could cost taxpayers up to £40 billion annually.
To address this, the IFS has proposed a double lock system tying state pension hikes to either wages or inflation. Chancellor Rachel Reeves has committed to maintaining the triple lock until 2029. The IFS report highlights that significant increases in the state pension age would be necessary to contain state pension expenditure below a certain threshold of national income, with projections indicating a rise to 69 by 2049 and 74 by 2069.
Mike Ambery, Retirement Savings Director at Standard Life, emphasized the need for comprehensive solutions to address under-saving and pension gaps, particularly for self-employed individuals and younger workers. Balancing the adequacy review and any potential changes to pension policies will be crucial, requiring careful consideration and consultation, especially with employers.
The state pension age is set to increase to 67 between 2026 and 2028, with a further rise to 68 planned between 2044 and 2046. Different from private or workplace pensions, the state pension varies based on birthdate, with the new state pension applying to those born after specific dates and offering a weekly rate of £230.25, while the basic state pension applies to those born earlier, providing a weekly rate of £176.45.
Your entitlement to the state pension hinges on your National Insurance record, with 35 qualifying years needed for the full new state pension amount and a minimum of ten years for any payment.