Pensions minister Richard Harrington has commissioned the Government Actuary’s Department (GAD) to assess projected life expectancy in future years for the state pension age review.
In a letter to the GAD, which provides independent acturial advice, Harrington said the purpose of the report was to “analyse whether those reaching State Pension age in a future specified period can expect to spend a specified proportion of adult life in receipt of State Pension, based on the current legislated timetable and, if not, to propose how the State Pension age timetable should change to deliver this”.
He added that the “third of adult life” principle has been used by the Office for Budget Responsibility, bringing the increase in State Pension age to 68 forward by five years, from 2046 to 2041.
The principle is based on 2014 Office for National Statistics projections that people retiring in the last 20 years will have spent, on average, 32% of their adult life receiving State Pension.
Harrington has subsequently requested the GAD analyse two scenarios to give the government a range of examples it can use in considering its options for the review:
* People spending 33.3% of their adult life (20 years of age onwards) in receipt of the State Pension in the future, which reflects the experiences of those reaching State Pensions age over the last 10 years.
* People spending 32% of their adult life in receipt of the State Pension in the future, which reflects the experiences of those reaching State Pension age over the last 20 years.
Commenting on the publication of the letter, Harrington said: “As set out in the Pensions Act 2014, the report from the Government Actuary complements John Cridland’s independent report on State Pension age, announced in March, and both will inform the government’s first review of State Pension age.
“People are living and working longer than ever before, that is why it is important we get this right to ensure the system stays fair and sustainable for generations to come.”
The government has committed to reviewing the State Pension age every six years. The first review, led by Cridland, is due by May 2017. In his interim report, Cridland said he would explore whether it was possible to “smooth the transition” between the working age and retirement.
AJ Bell senior analyst Tom Selby raised the prospect of people in the future having to wait until their 70s to receive the state pension if people keep living longer and adding pressure to the public purse.
He said: “Rapid rises in life expectancy have already seen the government set out plans to hike the state pension age for men and women to 67 in 2028. It is worth remembering that this is just two years higher than when the state pension was created in its current form 80 years ago.
“At that time, people were only expected to draw their state pension for a few years – the average life expectancy for both men and women born in 2016 is over 90 years.”
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