Speculation that the Chancellor would limit the tax incentives of private pension contributions came to nothing in this budget. Instead, he looked to state pensions, confirming that consultation on a flat rate state pension would begin in April and the state pension age will be automatically indexed to average longevity - meaning further rises are inevitable.
To give an example of how that could impact upon the future SPA, we can look back at how longevity has improved in the past. According to the Office for National Statistics a male age 65 in 1991 could expect to live for 14.1 years in retirement. A male age 65 in 2011 could expect to live for 18.1 years. So a 4.2 year improvement in longevity over that 20 year period.
If that 4.2 year increase in longevity is replicated over the next 20 years (2011 to 2031), by 2031 state pension could rise from the current 65 to age 69. It has already been pre-announced that SPA will increase to 66 between 2018 and 2020, and then to 67 between 2024 and 2026.
If there was a further 4.2 year increase in longevity between 2031 and 2051, state pension age could then rise to 73.
Andrew Tully, pensions technical director at MGM Advantage says:
"This should serve as a wake-up call for many people. Today’s 33 year old is likely to need to work until age 73 before they get their state pension. They may have planned to work to age 65, but the reality is likely to be beyond age 70 for many. If people want to stop work at an earlier age they need to review their retirement planning, and take control of their future.’
