Is it time to raise the pension age to 75?

As the population continue to age, the government has
already announced that the age at which individuals can claim their State
Pension is to rise. The pension age is set to rise to age 66 in 2020, age 67
between 2026 and 2028 and then age 68 between 2044 and 2046.

Now, a leading think tank has made waves by suggesting
that the government should raise the pension age to 75 by the year 2035 in
order to boost the economy.

Are they right, and is this even possible? We look at the
proposals and give you a useful reminder that it’s necessary to claim your
State Pension when you reach retirement age.

Think tank proposes the government should raise the
pension age to 75

From December 2018, the State Pension age for
both men and women has started to increase and will reach 66 by
October 2020.

Now, the Centre for Social
Justice has proposed increasing the pension age from 65 to 70 by 2028 and then
to 75 by 2035. The think tank, chaired by former secretary of state for Work
and Pensions, Iain Duncan Smith MP, says that Britain can no longer afford the
current plan to raise the pension age to 67 in 2028 and then 68 by 2046.

The report Ageing Confidently – Supporting an ageing workforce,
argues that the age at which savers can retire needs to be accelerated further,
as the State Pension is the largest single item of welfare spending in the UK,
accounting for 42% of all benefits in 2018.

The State Pension bill has increased from £17 billion in
1985/86 to £92 billion in 2016/17, representing an increase from 3.9% to
4.6% of GDP. In 2018, the Office for Budget Responsibility predicted spending
on the State Pension would rise to 5.6% of GDP by 2023 – an increase of £20 billion.

Adding to this is the fact the country is “witnessing a
significant demographic change,” since an increase in life expectancy and a
decrease in the fertility rate means that older people make up a growing
proportion of the population and could be in the majority by 2035, the think
tank stated.

To ensure the older people continue to make an
essential contribution to the economy as workers, carers, taxpayers and
volunteers, the Centre for Social Justice has made a number of proposals:

Increased
access to flexible working
Increased
access to training opportunities through a ‘personal learner account’
Enhanced
healthcare support through improvements in occupational health, training in
mental health first aid and further support for those aged 55 and over from the
Work and Health Programme
Implementation
of employee-tailored ‘mid-life MOTs’
The
initiation of an ‘Age Confident’ scheme that includes guidance regarding
workplace flexibility, workplace adjustments, age discrimination, training and
mid-life MOTs.

Assuming that these initiatives are introduced, the think
tank then suggests that the State Pension age should be raised.

It says: “The State Pension is an important benefit that
provides security to those who have retired. If we expect this benefit to
continue along with other public services, a sustainable State Pension age must
be introduced.”

Experts question timescale of proposed
pension age rise

The proposal to raise the pension age to
75 has come under fire from experts, with former pensions minister Ros Altman
going as far to call it ‘chilling and immoral’.

The government has also been warned it
would mean the UK would have the highest State Pension age in the developed
world.

Jamie Jenkins, Head of Global Savings Policy at
Standard Life says: “While the cost of the State Pension has continued to rise,
it is now largely under control through a combination of raising the age at
which it is payable and the amount by which it increases each year.

“Increasing the age at which it is payable to 75 would
be a huge departure from the agreed policy of giving people ten years’ notice
for even the gradual changes already announced. It would likely become the
highest State Pension age in the developed world.

“It would effectively change the purpose of the State
Pension from an income in retirement to an insurance policy against old age.”

Helen Morrissey, pension specialist at Royal London
agrees. She says: “While such proposals will undoubtedly save money, raising State
Pension age so quickly will cause huge issues for many retirees who will not
have been given adequate time to prepare.”

Don’t forget to claim your pension

If you have made private
provision for your retirement, then the State Pension might form a small part
of your overall retirement income. However, at almost £170 per week, it’s
important that you claim your State Pension when you reach retirement age.

The key message here is that you
have to ‘claim’ your State Pension. Many people believe that they will
automatically receive a pension when they retire, when the reality is that if
you do not actively claim it, the money will automatically be deferred.

Around four months before you
reach State Pension age, you should receive a letter from the Pension Service
informing you of how to claim. And, if the Pension Service does not hear from
you, it will automatically defer your payments.

Under rules introduced in 2016,
you need 35 years of National Insurance contributions to qualify for a full
State Pension which is currently £168.60 a week.

Steve Webb, Director of Policy at
insurer Royal London, said: “If you are over pension age and have not
received anything, you should call the Pension Service. If it does not hear
back, the Pension Service assumes that taxpayers want to defer their State Pension.
But the letter may not have reached its destination.”

A Department of Work and Pensions
spokesman said: “We want everyone to be able to claim what they are
entitled to and have a wide range of channels where people can get information
and advice.”