State pension age will have to raise again

Hargreaves Lansdown have said that that "further compromises" will have to be made to pensions, "particularly in relation to the state pension age" in response to a report released by the IFS today.

Tom McPhail, head of pensions research, Hargreaves Lansdown:

The state pension age (SPA) will have to rise again. The government has given a commitment not to hit anyone with an increase to their SPA less than 10 years before retirement, which means that everyone born before 1958 should probably be safe in assuming that they will reach their SPA by age 66 at the latest. However, thereafter things could get tricky. Current plans are to increase the SPA to 67 by 2028 but this could be brought forwards by a couple of years, meaning someone born in 1959 for example, could have to wait until age 67 – whereas at present government plans will not see the SPA hitting 67 for anyone born before March 1961. Thereafter, we think the SPA could rise to age 70 in the not too distant future.

As the IFS report shows, the long term effect of the state pension reforms is to save the government money. The original DWP impact assessment showed the cost of the state pension increasing from 6.4% of GDP today to 8.1% of GDP by 2060. Without the reforms, the cost would have risen to 8.5% of GDP.