State Pension Age Rises to 70

State Pension Age Rises to 70

by David Redmond on 30 Mar, 2011

It was bound to happen at some stage. There have been grumblings for years about how a state pension age of 65 was unsustainable in the face of an ageing population. Having already increased the pension age to 65 for women by 2018 and men by 2020, the Chancellor announced in the budget further rises that will see those currently under 30 work until they are 70 years old.

Coming as it does amidst a raft of cuts to public services, it’s easy to see this rise as simply mean spirited. However, this is one reform where the government is most definitely being fair.

As life expectancy has continued to increase, the length of time people spend retired has increased with it. This has meant a substantially larger pension bill, one that was only set to grow. What Osborne has done is introduce a mechanism whereby the state pension age rises in line with life expectancy.

As such, the retirement age is set to rise 1 year for every 8, roughly in line with average life expectancies. This is where the headline ‘state pension age rises to 70’ comes from.

Although it means that those under 30 will have longer working lives than their parents, it also means that the working age population will have to pay less towards the retirement of the previous generation, and will hopefully go a long way to defusing what was otherwise a ticking time bomb.

Of course, pensions aren’t the only problem associated with an ageing population, there are the associated costs to the NHS, but increasing the retirement age in line with life expectancy is not only proportionally fair (i.e. in adjusting the length of working life to be proportionally in line with previous and future generations) but inter-generationally fair.

With pensioners making up a progressively larger section of society, the proportion of tax revenues required to sustain their pensions would have grown along with the number of pensioners. By increasing the retirement age, Osborne may have saved younger generations further tax rises to pay for a larger pool of state pensions.

As with any reforms, there are problems on the horizon, not least the speed with which the other rises are being put into place. However, taking the broad view, this is a move that can only be described as fair.

About the Author

David Redmond

David Redmond is a Partner of Don Gilliard Finance Group. He is a fee-only, independent financial advisor and financial planner. For over 15 years, he has been helping individual investors and their families realize their investment goals.