The UK government has formally launched a fresh review into the state pension age, initiating a process that could lead to workers retiring later in life. The move, announced by Work and Pensions Secretary Liz Kendall, comes earlier than many expected and is accompanied by a broader assessment of retirement outcomes in the country.
Background and Timing
Under the 2014 Pensions Act, the UK government is required to review the state pension age every six years. The last review concluded in 2023, making the next review due by 2029. However, the Department for Work and Pensions (DWP) emphasized that while the review has begun early, it is not being expedited and can be completed anytime before March 2029.
Currently, the state pension age is 66 for both men and women. It is already scheduled to increase to 67 between 2026 and 2028, and to 68 sometime before the middle of the century.
Fiscal Pressures and Population Trends
Analysts suggest that an acceleration of these planned increases is likely. Damon Hopkins, head of workplace savings at Broadstone, noted, “An ageing population and the rising fiscal burden of the state pension make further changes inevitable.”
The cost of the state pension is substantial and growing. In the 2023/24 fiscal year, it amounted to £124 billion, representing about 5% of GDP—up from 3.5% at the start of the century.
Independent Analysis and Broader Retirement Strategy
To guide the review, Kendall has appointed Dr. Suzy Morrissey, deputy director of the Pensions Policy Institute, to produce an independent report on relevant factors. Additionally, the government’s actuarial department has been tasked with assessing how long people are spending in retirement relative to their working lives.
Simultaneously, the government is relaunching a pensions commission to examine how to increase retirement savings and improve pension outcomes. Officials say aligning this work with the state pension age review will allow for a more holistic view of how to ensure long-term sustainability.
The new commission will be led by Baroness Jeannie Drake, a former member of the Turner Commission, along with Professor Nick Pearce of the University of Bath and former Kingfisher CEO Sir Ian Cheshire.
Focus on Pension Savings
The government’s renewed focus on retirement savings follows concerns that too few people are preparing for retirement. Nearly half of the UK’s working-age population — around 18 million people — are not saving anything for their future. Among the self-employed, only one in five currently contribute to a pension, a dramatic drop from half in the late 1990s.
The commission will also examine whether current pension contribution rates are adequate. Presently, the auto-enrolment system requires minimum combined contributions of 8% of qualifying earnings, with at least 3% coming from employers. However, Labour has stated it does not plan to raise these rates during the current parliamentary term.
Kendall has tasked the commission with creating a long-term roadmap to ensure future retirees can enjoy adequate incomes through both state and private pensions.
The Triple Lock Commitment
Despite rising costs, the government remains committed to the “triple lock” policy, which guarantees the state pension increases annually by whichever is highest: inflation, average earnings growth, or 2.5%. This pledge, introduced by the coalition government in 2010, is projected to increase state pension spending by an additional £31 billion per year during this parliament.
Kendall acknowledged the complexity of the task ahead, noting the tension between cost-of-living pressures, business challenges, and the need for sustainable pension reform. “Without action, tomorrow’s pensioners will be poorer than today’s,” she warned
