Millions of people could be forced to work until they are 75, the Government has hinted as details of a review into the state pension age were published.
Ministers have announced a radical review of the pensions regime amid concerns that he current system is not “affordable in the long-term”.
The review will be chaired by Sir John Cridland, the former head of the Low Pay Commission, and will assess whether the current pensions system is “affordable in the long-term”.
Those under the age of about 55 could be affected by the shake-up, which will consider what the state retirement age should be from April 2028. The results will be published next May.
The current state pension age is 65 for men and 60 for women, and is due to rise for both to 66 by 2020. It is due to increase to 67 between 2026 and 2028, and will be linked to life expectancy afterwards.
The Office for Budget Responsibility, the financial watchdog, has forecast that the pension age will have to rise to 69 by the late 2040s before increasing again to 70 by the early 2060s.
And Royal London, the pensions provider, has just published research suggesting that today’s workers will need to retire as late as 81 to enjoy the same standard of living enjoyed by their parents. The findings raise the prospect of some people having to “work until they drop” to sustain their current lifestyles.
The government said the review, required under existing legislation, would consider changes in life expectancy as well as wider changes in society and “make sure that the state pension is sustainable and affordable for future generations.”
It said it would also consider whether “the current system of a universal state pension age” rising in line with life expectancy was “optimal in the long run”.
This suggests the review will look at whether the retirement age should rise even if life expectancy slows.
Tom McPhail, head of retirement policy at financial services firm Hargreaves Lansdown, warned that he state pension age is likely to rise by faster than currently planned. He said that those joining the workforce today are likely to find themselves waiting until their mid-70s before they are entitled to receive their state pension.
Tim Farron, the Liberal Democrat leader, said: “This review is clearly intended to open the door to increasing the State Pension Age even further, abandoning the principle Lib Dems secured in Government that the State Pension Age should rise in line with life expectancy.
“Any such suggestion will be of real concern to workers across the country that the Government is in the early stages of abandoning its commitment to fairness for those who have worked hard all their lives.”
The year-long review will consider ending “universal” state pension age, instead basing it on different groups of workers and even regional living standards.
It raises the possibility that manual workers in some areas might be allowed to claim their pension earlier than those who have spent their working lives in offices in other places.
It came as a minister suggested pensions tax relief should be used to help lower paid workers rather than those who are better off, adding to expectations that George Osborne is preparing to mount a raid on the pensions of middle-class savers.
the Chancellor is considering plans to scrap higher rate tax relief on pension contributions as part of his Budget later this month and move towards a “flat rate”, which could be as low as 25 per cent.
The move would give lower paid workers more tax relief on their pension constributions but represent a significant cut for those who earn more.
In the Commons Jack Lopresti, a Conservative MP, raised concerns about cuts to the lifetime allowance on pensions, which is being reduced from £1.25million to £1million from April of this year.
He said: “Does the Chancellor agree it would be better to encourage saving by increasing the tax limit on pensions rather than reducing it, particularly at a time when savers are struggling to get decent returns?”
David Gauke, the Financial Secretary to the Treasury, responded: “As a Government we want to encourage more saving. We have taken steps for reforming our tax system so that pensions becomes more attractive but we also need to ensure that the costs of pension tax relief are targeted in the right direction.” H/t – the telegraph