The State Pension Age review, which is required by law, will report back by March 2029 and could also herald changes to the current timetable, which will see the age rise to 68 between 2044 and 2046.
But The i Paper understands the current Government is unlikely to make any decisions on further increasing the state pension age, or the timetable, before the next election, which is due in 2029. Ministers want to consider any changes in the round with a wider pensions review.
The review will be split into two parts – one on the factors ministers should consider that relate to the state pension age, and the other on the proportion of adult life spent in retirement.
The Office for Budget Responsibility (OBR) warned earlier this month that on the current trajectory, the UK’s ageing population and its knock-on impacts for healthcare and pension spending will push debt from 94 per cent of GDP to 270 per cent by the early 2070s.
The watchdog also highlighted that the triple lock will be three times more expensive by the end of the decade than it was expected to be when it was introduced in 2011, costing £15.5bn by 2030.
The State Pension Age review will be launched alongside a major shake-up of pensions that could mean 18-21 year-old workers are auto-enrolled into saving for retirement.
The current system sees those aged 22 and older, and earning more than £10,000 a year, auto-enrolled into pension contributions at a minimum of eight per cent of their wages, with four per cent contributed by workers, three per cent from employers and one per cent in Government tax relief.
The Commission will be launched today by Work and Pensions Secretary Liz Kendall alongside analysis warning that people due to retire in 2050 are on course for £800 – eight per cent – less private pension income than those retiring today.
The self-employed, low paid and some ethnic minorities are particularly affected by low savings rates.
Women face a significant gender pensions gap, with those approaching retirement in line to receive barely half the income that men can expect.
The previous commission recommended automatically enrolling people in workplace pensions, which has seen the number of eligible employees saving for pensions rise from 55 per cent in 2012 to 88 per cent.
‘Tomorrow’s retirees risk being poorer than today’s’
The commission will be led by Baroness Jeannie Drake, a member of the previous commission, and will report in 2027 with proposals that stretch beyond the next election.
Kate Smith, head of pensions at Aegon, urged the commission to make “bold, brave and possibly unpalatable recommendations”, including “significant increases” to auto-enrolment contributions after 2029.
She said: “If we’re to avoid future generations of pensioners experiencing financial hardship, we need reforms that enable more people to build a decent standard of living, and we need them sooner rather than later to maximise the numbers who can be helped.”
Ministers hope the Pensions Commission will build a consensus around changes, as its predecessor did, working with businesses and trade unions.
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