State pension age could rise above life expectancy

News


28 Feb, 2017

State pension age could rise above life expectancy

Unless the "triple lock" pension scheme is scrapped, MPs have warned that millions of people are in danger of dying before even getting a chance to claim their state pension.

Under the triple lock pension scheme, state pensions rise each year depending on the highest rate of price inflation or by average earnings growth. The system guarantees a minimum rise of 2.5% every year.

According to the Financial Times, it came into effect in 2012 as a way to combat the fall in pensioner incomes in relation to earnings. In November 2016, during his first Autumn Statement, Chancellor Phillip Hammond revealed that the new flat rate state pension will rise to £159.55 a week and the basic state pension to £122.30 from April 2017.

However, a recent report published on Tuesday revealed that, in order to sustain the increases, the state pension age may need to rise beyond 70. This is higher than the average male life expectancy in 26 areas of England, including Liverpool Manchester, Leicester and East London. It is also higher than 162 places in Scotland.

In stark contrast, in wealthier neighbourhoods where male life expectancy is higher, pensioners will continue to benefit from higher state pensions for years after retirement. In the area of Westminster in London for example, life expectancy is one of the highest in the UK at 92.9 years.

The study was conducted for the Work and Pensions Select Committee by the Institute for Fiscal Studies. The think-tank found that the state pension age would need to rise to 70.5 years by 2060 for spending on the state pension to be maintained at about 6% of GDP in the long run.

The committee's chairman and Labour MP Frank Field said: "With the triple lock in place the only way state pension expenditure can be made sustainable is to keep raising the state pension age".

He went on to say that the 'triple lock' scheme would have would have done its job of providing a decent minimum pension income for people by 2020 and should then be scrapped. However, the shadow work and pensions secretary will call on the Government to guarantee the "triple lock" to go on beyond 2020.

During his inaugural Autumn Statement, Chancellor Philip Hammond indicated that the "triple lock" will remain until 2020 but could be reviewed after that.

Today's News - Trump plans 'massive' hike in defence spending