Employees could see their retirement pushed back at least 12 months every two years after the Chancellor, George Osborne announced plans to link the pension age to rising longevity. The Chancellor announced a mechanism to raise the state retirement age automatically in line with life expectancy. The pension age is already due to increase to 66 by 2020.
Mr Osborne said it would no longer be “affordable” to provide an adequate state pension when most people could retire at the relatively young age of 65 or earlier. In future, he said, regular, independent reviews should establish longevity rates, which would then be used to decide the state pension age.
Retirement for public sector employees is due to be linked to the state pension age by the end of the current Parliament. Longevity is rising at a rate of seven months every year, meaning that, under the proposal, employees in their twenties, thirties and forties could find themselves working beyond their 75th or even 80th birthday.
A number of other European countries, including Sweden, Norway and Germany, have introduced some link between the state retirement age and life expectancy. Mr Osborne said that adopting a similar link would “help Britain live within her means”. He said he wanted pensions which were fair to workers and “fair to the taxpayers who have to fund them”.
Large pension funds increased their longevity expectations for the fourth year running last year, saying they expected future pensioners to live an extra seven months. Men who are currently 65 should expect to live until they are 87 years and five months, while women will survive to nearly 90 on average.
At the current rate, by 2066, around half a million people a year will be celebrating their 100th birthday, compared with about 10,000 now.
