Is a state pension age (SPA) of 75 looking more likely?

A report from a Conservative think tank suggesting a quicker rise to a state pension age of 75 has ruffled feathers, but is increased longevity making such moves inevitable? The Centre for Social Justice (CSJ) report Ageing Confidently – Supporting an ageing workforce has recommended that the SPA should better reflect the longer life expectancies that we now enjoy. They propose accelerating the SPA increase to 70 by 2028 and then 75 by 2035. Currently a SPA of 68 is pencilled to be phased in between 2037 and 2039.

The CSJ is not a think tank that regularly makes the headlines, but it does have a high-profile chairman – Iain Duncan Smith, the former Conservative leader and former Secretary of State for Work & Pensions. The CSJ’s argument for raising SPA with such haste is financially driven. The report notes that at present there are 28.2 pensioners for every 100 people of working age, but by 2050 this is projected to increase to 48 per 100 – almost one pensioner for each two working age members of the population. As the state pension system is funded on a pay-as-you-go basis, that jump has serious consequences even before the impact of rising healthcare costs is considered. Raising SPA to 75 by 2035 would keep the ratio at between 20 and 25 per 100.

Such a steep rise in SPA would be politically problematic as the ongoing protests and resulting court cases about increases in women’s SPA prove. However, the CSJ’s point about whether the current SPAs will continue to be affordable isn’t going away. If nothing else, it’s a reminder that supplementing the state pension with private provision is a surer path to a reliable retirement income.