When will you get your state pension?

Once again, the age at which you can start claiming your state pension is being debated. In August, the Department for Work and Pensions (DWP) issued a call for evidence for its third state pension age review.

Although it’s now a matter that regularly makes headlines, tinkering with state pension ages is still a relatively new phenomenon.

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Set at 60 for women and 65 for men when it was first introduced in 1948, the state pension age (SPA) went untouched for 62 years.

Change was only set in motion when the Pensions Act 1995 triggered the equalisation of the SPA for both sexes, which saw the now highly controversial increase for women phased in from 2010 (with thousands of ‘Waspi’ women born in the 1950s claiming that they were not given sufficient notice of the change).

Now, the SPA is coming under scrutiny on a much more regular basis.

In 2005, The Pensions Commission said that the SPA needed to be adjusted in line with increasing life expectancy, using the principle that each generation “should enjoy the same proportion of life contributing to and receiving state pensions”.

The Pensions Act 2007 then paved the way for gradual increases from age 65 to 68 between 2024 and 2046, with the timetabling of those rises bought forward by both the Pension Acts of 2011 and 2014.

Today, the SPA stands at 66 for both men and women and is scheduled to rise to 67 between 2026 and 2028, then to 68 between 2044 and 2046.

However, under the Pensions Act 2014, the government now has to review the SPA at least every six years.

We’re now up to the third compulsory review which will involve a report from the government’s Actuary Department and an independent report headed up by Suzy Morrissey, deputy director of the Pensions Policy Institute.

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The key issues the review will be considering are changes to life expectancy – the longer people live, the more the state pension needs to shell out - and healthy life expectancy - that is how long we can realistically expect the “average” person to carry on working.

The review will also need to take into account the “guiding principle” that people should not be spending more than a third of their adult life receiving the state pension.

As pressure on the public purse intensifies, the government has tough decisions to make.

The state pension is no longer just a safety net for those lucky enough to live a few years after they finish work, it’s the bedrock of retirement income for millions of pensioners who may live for 30 years or more. And as such, it’s costing a fortune.

According to the latest numbers from the DWP, 55% of social security spending now goes on pensioners and the state pension bill itself is expected to reach £145.6 billion in the current tax year.

The challenge is compounded by the triple lock, which guarantees that the state pension will go up each April in line with the highest of inflation, wage growth or 2.5%.

Then there’s our ageing population to contend with. According to the Office for National Statistics (ONS), the number of people eligible to claim the state pension will soar to 13.7 million by 2032 (up from 12 million in 2022). By 2047, it reckons there will be more than 15 million pensioners claiming the universal benefit.

Something is going to have to give.

Writing in The Times in August, pensions commentator Tom McPhail, suggested there were “legitimate arguments” for linking the SPA to health or where you live (in Blackpool life expectancy, he says, is 10 years less than the most affluent parts of London). Or, payments could be linked to gender – if men are dying younger than women, should they get their state pension earlier?

A simpler solution, he suggests, is to increase the SPA to 75. This, he claims, would make it easier for older people to plan their finances and give younger people the confidence that they’ll get a state pension too. “At this age, it would be possible to set it at a level where people could actually live on it. Send a clear message: your private savings are to cover the gap between stopping working and age 75,” he wrote.

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So, where does that leave the upcoming SPA review? Whatever the conclusion the two reports reach, the government is under no obligation to act on them and it will take huge amounts of political guts to do anything bold.

In 2023, the second SPA review recommended that the increase to age 68 should happen between 2041 and 2043 (three years ahead of the current schedule). However, Rishi Sunak – who was prime minister at the time – dismissed the proposal.

Changes to the timetable recommended in the first review weren’t acted on either.

As Steve Webb, former pensions minister and now a partner at pension consultancy LCP, says: “The SPA review takes account of the latest life expectancy figures from the Government Actuary; because life expectancy improvements have been slowing down in recent years, the pace of increases in state pension age should slow down; but the government will, if anything, want to speed things up.”

“The result of all this is that whatever the independent reviewer says, the government can still simply ‘think of a number’ and set pension age dates as it sees fit.”

The age at which you get your state pension is crucial for retirement planning – especially if you’re a member of a defined benefit (DB) pension as there’s a pretty good chance your retirement age will be linked to the SPA. There’s more flexibility if you’ve got a defined contribution (DC) pension, as you can access your pot at any age from 55 (rising to 57 in 2028), but only if it’s healthy enough to allow you to retire before your state pension kicks in.

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For those in middle age, it doesn’t look like there is immediate cause for concern. The third review doesn’t need to be completed until the end of March 2029 and even then any recommendations could once again be ignored for political expedience.

“There’s always a temptation to ‘kick the can down the road’, by putting off making a decision,” notes Webb. “After all, increasing state pension age gets you no money in the short term (because of the need for a 10-year notice period of any changes) but potentially lots of political flak.”

The recent Waspi challenge will be fresh in the government’s mind too and it would have to go to great lengths to ensure those affected by the change are aware of it.

That said, experts are increasingly thinking that some painful changes will become unavoidable.

In July, the Institute for Fiscal Studies (IFS) said that it’s time to scrap the triple lock; its unpredictable nature means it could cost anything from £5 billion to £40 billion by 2050. Instead, its pension review proposed identifying a target level for the benefit that is a proportion of average earnings. Once that target has been reached, it should then simply increase in line with wage growth.

Webb adds: “My guess would be that at some point a government will announce that the triple lock is going - perhaps after the following election - and will also announce a faster schedule of pension age rises. It’s not necessarily a case of either/or; but a government languishing in the polls may feel no great urge to do either of these things for now.”