The retirement age will have to rise to 71 for middle-aged workers across the UK, according to research into the impact of growing life expectancy and falling birthrates on the state pension.
The UK pension age of 66 is set to rise to 67 between May 2026 and March 2028. From 2044, it is expected to rise to 68.
But the research suggests that this is not enough, and that anyone born after April 1970 may have to work until they are 71 before claiming their pension.
This age limit may need to be set even higher, say experts, thanks to the high rate of workers exiting the workforce before they reach state pension age, predominantly due to preventable ill health.
Les Mayhew, associate head of global research at the International Longevity Centre and author of the report State Pension Age and Demographic Change, said: “In the UK, state pension age would need to be 70 or 71 compared with 66 now, to maintain the status quo of the number of workers per state pensioner.
“But if you bring preventable ill health into the equation, that would have to increase even more,” added Mayhew, who is also professor of statistics at Bayes Business School and has advised the government on rises to the state pension age multiple times as a senior civil servant and in his current roles.
By age 70, only 50% of adults in England and Wales are now disability-free and able to work. A smaller working population and a large economically inactive population reduces the tax base to pay for pensions – and creates huge labour shortages, which creates its own problems.
According to the Office for Budget Responsibility, pensioner benefits will cost the UK government £136bn in 2023-24, of which £124bn will be spent on state pensions.
Jonathan Cribb, associate director and head of retirement at the Institute for Fiscal Studies, said that while he did not disagree with a higher pension age, increasing it without addressing other cost-saving measures was not “realistic or equitable”.
He added: “It would disproportionately impact poorer individuals whose ill-health means they have shorter lives, and so who receive pensions for less time.”
While the ILC’s solution is “illustrative of the kind of pressure that an ageing population puts on the public finance”, a rise in the retirement age to 71 was not a “realistic policy option unless you have a real emergency”, he added.
Cribb pointed out that while state pensions and pension benefits are estimated to increase by £45bn by 2050, the pressure on public finance from health and social care is estimated to increase by £105bn in today’s terms over the same period. “The real issue is actually around the NHS and social care,” he said.
The Intergenerational Foundation, an independent thinktank, agreed that the pension age had to rise, but questioned on whose shoulders that cost should fall.
Younger people, their research has found, do not have the financial assets that their parents and grandparents did. In 2010, those under 40 held £7.53 of every £100 of wealth. By 2020, that had fallen to £3.98. One-third of the UK’s 14 million Gen-Xers are at high risk of retiring on insufficient income.
Angus Hanton, co-founder of the thinktank, said pension age should be based on life expectancy and occupation. He also supports a wealth tax to fund and pay more towards people’s retirement, and reducing income tax and national insurance.
“The over-60s should finance their own extra retirement years since they have received such generous treatment from the state,” he said. “The money raised can be used to invest in improving the health and prospects of younger generations so they are less of an economic burden as they age.”
Andrew Scott, co-author of the 100-Year Life, whose new book, The Longevity Imperative, will be published shortly, said there needs to be a greater focus on preventing ill health not just in old age but from early age through adulthood.
“Increasing the state pension age would be a terrible policy – a really bad way of attempting to make people more productive,” he said.
David Finch, assistant director at the Health Foundation, said increasing the state pension age without providing support for workers with health issues would worsen the situation by exacerbating existing health inequalities. “The government should provide more support for people already out of work due to health issues,” he said. “Employers can help by adapting roles and maintaining contact with employees on sick leave.”
The government said it would ensure that the state pension remained “a sustainable and fair foundation of income for future generations”.
A spokesperson said: “We have committed £70m in employment and skills support for the over-50s, which has seen an extra 54,000 over-50s added to company payrolls. Our £2.5bn Back to Work plan is supporting people to stay fit and find work, in addition to £14.1bn to improve health services to help people live longer, healthier lives.”