Savers currently planning their retirement may be in for a nasty surprise, according to the International Monetary Fund (IMF). On current projections, the UK’s public spending on pensions is unsustainable, so future governments may need to raise the state-pension age more quickly than expected, warns its new report.
At present, both men and women are entitled to start claiming their state pension at the age of 65, with a long-term programme to equalise this age completed last month. Over the next two years, the minimum age will gradually be increased to 66, and there are further plans
to raise it to 67 by 2028.
However, the government’s own figures, published by the Office for Budget Responsibility, suggest that public spending on healthcare and pension benefits will have to increase by four percentage points of GDP over the next 25 years. This could mean both tax increases and further changes to the state pensions system to reduce its costs. With average life expectancies having risen sharply in most parts of the UK in recent years, the IMF thinks an even higher state- pension age is likely sooner or later.
Successive governments have left themselves room to make further adjustments, agreeing a policy to keep the state-pension age under review over time. However, changes would cause controversy, particularly if they are not phased in over an extended period or clearly explained.