· News

State pension age must increase to 71 by 2050, researchers say

My Pension Expert says equipping employees to retire on time is essential for their financial wellbeing

The International Longevity Centre has stated that the UK state pension age will need to increase to 71 by 2050, to remain affordable.

The report calculated that the state pension age would need to increase to 68 by 2041, to account for projected labour shortages and economic inactivity among the working-age population.

These changes would keep the age dependency ratio as roughly three people over the age of 20 to every person over 65, ensuring future generations have the same number of years in retirement as previous generations.

Equipping employees to retire when they want to is part of looking after their financial wellbeing, according to Lily Megson, policy director for the advisory body My Pension Expert.

She told HR magazine: “In the midst of an ongoing cost of living crisis, and with the state pension age gradually being pushed higher and higher, it is imperative that HR professionals are equipped to provide the right kind of support.

“Improving educational resources is important, and fostering open dialogues in the workplace about retirement planning is an essential step.”

Read more: How to motivate mid-life employees to save for retirement

Megson added that employers could go a step further by providing employees with access to independent financial advisers (IFAs).

She said: “They can either fund such a service, discount it, or at least offer a list of potential IFAs that employees may wish to approach.

“This will help employees manage more complex financial issues and provide personalised support, which is crucial for improving retirement outcomes.”

Kate Smith, head of pensions at the asset management company Aegon, called on political parties to detail their plans for the future of state pensions ahead of the upcoming General Election.

She said: “Certainty around the state pension is vital.

“Pushing back the state pension age to 71 would be a shock for many – when they are expecting to receive this from age 67 or 68.

“Some will only receive it for a short time, others not at all.”

She continued that the government should not delay their response to the findings.

She said: “This is too important an issue to be kicked into the long grass.

“People need to know where they stand and what this means for their later life, giving them plenty of time to adjust their working and savings plans.”

Read more: National insurance cuts raise state pension question

The government previously decided not to bring forward the date to increase the state pension age in March 2023.

For Lizzy Holliday, director of public affairs and policy at workplace pension provider NOW: Pensions, the pensions system needs wider reform.

The business revealed in a report yesterday (7 February) that by age 67, women will have £136,000 less in pension savings than the average man.

Holliday explained that, if implemented, this change could widen the gender pension gap.

She said: “Our report shows that two thirds (67%) of pensioners in poverty are women; this is simply unacceptable in the 21st century.”

Holliday noted the success of the automatic enrolment (AE) system in bringing more people into pensions savings – particularly women.

She continued: “The outcomes envisaged at the inception of AE have not yet been achieved; this means we need to explore contribution levels. 

“This must include tackling the issues of pensions adequacy, contribution levels and how the scope of AE could be expanded to include more women.”