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Wednesday 26th May 2010
State pension age to rise faster
Speeding up the raising of the state pension age from 65 to 68 is to be part of the UK government's first reforms.
The plan will be in the Pensions and Savings Bill, which was outlined in the Queen's Speech.
The state pension age is already scheduled to rise to 68 in stages, between 2024 and 2046.
Separately, the government will also restore a link between the basic state pension and the rise in average earnings, from 2011.
The move should lead to a substantial long-term improvement in the value of the state pension.
Its value as a proportion of earnings has declined, from 26% to 16%, since the old link between average earnings and the state pension was cut in 1980, and replaced with a link to inflation as measured by the Retail Prices Index.
As well as linking the state pension increases to the rise in average earnings, the government has also already pledged to raise pensions in any case "by the higher of earnings, prices or 2.5%".
It was the Labour government's policy in recent years to raise state pensions by at least 2.5%, even if inflation was lower, though this was a discretionary policy renewed each year.
The coalition describes its new approach as giving pensioners a "triple-lock" so they will always benefit from a minimum 2.5% annual rise.
State pension
The state pension age was scheduled to rise to 66 between 2024 and 2026, under plans laid down by the previous Labour administration, with two further increases at 10-year intervals to eventually take it to 68. The government's review will look at whether the continued increase in longevity makes the current timetable outdated, and if the increases in state pension age should come in earlier.
John Ball, at pension consultants Towers Watson, said: "While attention has focussed on how soon the state pension age will rise to 66, the bigger question is what happens afterwards."
"Rather than rising to 68 by 2046, we could see it going up further and faster. In Ireland, it is set to reach 68 by 2028."
Source: BBC News