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Latest longevity figures on life expectancy could necessitate a further rethink of state pension age

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People are now expected to live longer than the Government thought when it decided to increase the state pension age, leading to another pensions headache for employers, new research reveals.

According to the Office for National Statistics, life expectancy for people born between 2006 and 2008 has reached 77.4 for males and 81.6 years for females. This marks an increase from 1991-93 levels, when average ages of 73.4 years for men and 78.8 years for women were recorded.

But when the Government proposed increasing the state pension age to 66 by 2026, official projections indicated that average life expectancy for people turning 66 in that year would be improved by 20.6 years for men and 23.0 years for women.

Average male life expectancy at 66 is now projected to improve by 20.6 years by 2011. Average female life expectancy at 66 is now projected to improve by 23 years by the end of next year. 

Under current legislation, 2023 is the last full year in which people will be able to claim a state pension as soon as they turn 65. Comparing today's projections with those in use when policy decisions on state pension age were taken, average life expectancy has improved from 21.2 to 22.7 years for men reaching 65 in 2023.  For women reaching 65 in 2023, it has risen from 23.7 to 25.2 years. 

Rash Bhabra, head of corporate consulting at Watson Wyatt, said: "The political debate is about whether to bring forward the increase in State Pension Age to 2016 for men and 2020 for women. If the sole benchmark were the official life expectancy projections, a faster change could be on the cards. 

"The Government intended that, immediately after each increase in State Pension Age, men could expect to claim their state pensions for an average of just under 21 years and women for 23 years. You would need to increase the State Pension Age to 66 almost overnight to achieve that based on the latest projections.

"Recent legislation, which increases the amount of money going to pensioners, was supposed to let people know what they could expect from the state and when. The deteriorating fiscal position made it doubtful that this settlement would last and the longer people live, the more expensive state pensions will be without further reforms."

George Osborne, the shadow chancellor, has said a Conservative Government would hold a review with the aim of bringing forward the date at which State Pension Age starts to rise, but that it would not start to rise above 65 until at least 2016 for men and 2020 for women.