With increases in life expectancy and the growing cost of the state pension, speculation is rife that the UK will soon need to raise the state pension age to balance its ballooning books.
Denmark has just passed a law that will soon give it the highest retirement age in Europe, raising it to 70 by 2040.
The Scandinavian nation has tied the official retirement age to life expectancy since 2006 and has revised it every five years. It is currently 67 but will rise to 68 in 2030 and to 69 in 2035.
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All people born after 31 December 1970 will have to wait until they are 70 to claim pension benefits in Denmark.
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The current UK state pension age is 66. It is due to rise to 67 by 2028 and 68 by 2046, though there have been attempts to bring this forward.
Ian Futcher, financial planner at Quilter, said: “Increasing the state pension age can be a controversial move that will ultimately upset a large cohort of people who will feel the goalposts are being shifted during a time of wealth inequality between generations.
“However, the problem facing governments across developed nations is we have aging populations, and this is adding to the cost of the state pension, at the same time as the tax base is potentially shrinking.”
MoneyWeek looks at how much more the average saver would need if the UK state pension age were to be increased to 70, like in Denmark.
Will the state pension age rise to 70?
While there are no plans to raise the state pension age beyond 68 currently, it is something that will get discussed.
A review carried out in 2023 decided the rise in the state pension age to 68 would not be brought forward – yet. Those born on or after 5 April 1977 will be the first cohort to wait until 68, under current plans.
A 2017 government review suggested expanding this to include those born in the late 1960s. But it was decided instead the pension age would not be changed until a further review was carried out, with a decision expected potentially in 2026.
The pressure is on the government to act to bring down the cost of the state pension. More than half – 55% – of UK social security expenditure goes to pensioners, according to government statistics. In 2025 to 2026, the UK will spend £174.9 billion on benefits for pensioners.
This includes spending on the state pension which is forecast to be £145.6 billion in 2025 to 2026 – inflated by the hugely expensive triple lock that sees the state pension increase by inflation, earnings or 2.5%, whichever is highest, every year.
Denmark’s decision has once again raised the question of how far the UK state pension age could increase – and how much that could cost the average saver.
How much more you would need to save if the state pension age hit 70
The shortfall that a later state pension age – from the current planned 68 to a hypothetical increase to age 70 – creates is around £13,900 per year for the two year gap, according to calculations by wealth manager Quilter.
To make that shortfall you need quite a bigger pension pot.
If you retired at 65 and the state pension kicked in at 68 you would already require a pot of £435,237. This assumes living to 95 on the Pension and Lifetime Savings Association’s (PLSA) moderate standard of living in retirement, which requires £31,300 a year for a single person.
To retire at 65 with the state pension not arriving until age 70 you would require £459,201 by Quilter’s estimates – a pot £23,964 bigger (all growth is assumed at an average 5% per year and inflation at around 3%).
To make up this shortfall if you were 30, you would need to contribute an additional £48 a month into your pension to make up the difference – an extra £576 a year.
At 40, that jumps to £76 a month extra – almost £1,000 more a year. For 50-year-olds, that jumps up again to an additional £140 a month, or £1,680 a year.
Quilter’s Futcher said. “Here in the UK, there will come a point where the state pension is simply too expensive in its current guise and the government will have to choose to either reform the triple lock or up the state pension age.
“What people need to understand is that they cannot rely on the state pension to help them through retirement. It is a good source of income, but it does not provide a quality standard of living on its own, and should it rise beyond 68, this will simply just require personal pensions to do more of the heavy lifting.
“As such, now is as good a time as ever to review your pension arrangements and make changes if possible, in order to boost contributions and ensure you are invested correctly.”
