Research shows that due to the increasing life expectancy and decreasing birth rates, middle-aged workers in the UK will need to work until the age of 71 before being eligible for state pension.
The current retirement age for UK citizens is 66 years old and is projected to increase to 67 between May 2026 and March 2028. By 2044, it is anticipated to further increase to 68 years old.
However, the findings indicate that this may not be sufficient and individuals born after April 1970 may need to work until they are 71 years old in order to receive their pension benefits.
Experts suggest that the current age limit may need to be increased even further due to a significant number of workers leaving the workforce earlier than the state pension age, primarily because of avoidable health issues.
According to Les Mayhew, the associate head of global research at the International Longevity Centre and author of the report titled “State Pension Age and Demographic Change,” the UK would need to increase its state pension age to 70 or 71 from the current age of 66 in order to maintain the current ratio of workers to state pensioners.
“However, when considering avoidable health issues, this would likely lead to an even greater increase,” stated Mayhew. He serves as a statistics professor at Bayes Business School and has provided guidance to the government on multiple occasions as a senior civil servant regarding adjustments to the state pension age.
At the age of 70, only half of the adult population in England and Wales is free from disabilities and able to participate in the workforce. This leads to a decrease in the working population and an increase in those who are not economically active, resulting in a smaller tax pool to support pensions. This also causes significant shortages in the labor market, leading to further complications.
The Office for Budget Responsibility reports that the UK government will spend £136 billion on pensioner benefits in 2023-24, with £124 billion allocated for state pensions.
According to Jonathan Cribb, who is the associate director and leads the retirement department at the Institute for Fiscal Studies, raising the pension age is not a problem. However, he believes that doing so without implementing other cost-saving measures is not a practical or fair solution.
He stated that the proposed measure would unfairly affect individuals with lower income and poor health, resulting in them receiving pensions for a shorter period of time due to their shorter life expectancy.
The ILC’s proposal demonstrates the impact that an aging population has on public finances. However, increasing the retirement age to 71 is not a practical policy choice unless there is a serious crisis, according to the source.
Cribb highlighted that although state pensions and pension benefits are projected to rise by £45 billion by 2050, the strain on public funds from healthcare and social services is expected to increase by £105 billion in current terms during the same timeframe. He emphasized that the true concern lies in the challenges facing the NHS and social care.
The Intergenerational Foundation, a nonpartisan research organization, concurred with the notion of increasing the retirement age, but raised concerns about who would bear the financial burden.
According to recent studies, younger individuals lack the same level of financial resources as their older relatives. In 2010, those under the age of 40 possessed £7.53 for every £100 of wealth, but by 2020, this had decreased to £3.98. Additionally, one-third of the UK’s 14 million Gen-Xers are in danger of entering retirement with inadequate income.
According to Angus Hanton, one of the creators of the thinktank, retirement age should be determined by an individual’s life expectancy and job. He also advocates for a tax on wealth to support and increase contributions towards retirement, while also decreasing income tax and national insurance.
“The elderly population should be responsible for funding their own additional years of retirement, as they have already been given ample support from the government,” he suggested. “The funds generated could instead be utilized to enhance the well-being and opportunities of younger generations, reducing their economic impact as they grow older.”
According to Andrew Scott, one of the authors of the 100-Year Life, his upcoming book The Longevity Imperative emphasizes the importance of addressing and preventing health issues from early adulthood, not just in old age.
He stated that raising the retirement age would be a detrimental decision and not an effective approach to increasing productivity.
Assistant Director at the Health Foundation, David Finch, believes that raising the state pension age without offering assistance to workers with health problems will only make things worse by further exacerbating existing health inequalities. He suggests that the government should provide additional support for individuals who are unable to work due to health issues, and that employers can play a role by adjusting job responsibilities and staying in touch with employees who are on sick leave.
The government promised to maintain the state pension as a reliable and equitable source of income for the next generations.
A representative announced that we have dedicated £70m towards aiding employment and skills for individuals over the age of 50. This has resulted in an increase of 54,000 over-50s being hired by companies. Our Back to Work plan, worth £2.5bn, is assisting individuals in staying fit and finding employment. Additionally, we are investing £14.1bn to enhance health services in order to promote longer and healthier lives for people.
Source: theguardian.com
