Government State Pension Age Review Could Force Millions to Work Beyond 66 — Here's What's Being Considered

Millions of workers in the UK may be required to work beyond the current retirement age of 66, following a new government review of the state pension system.

According to reports, the review, announced by Work and Pensions Secretary Liz Kendall, will assess whether changes to the state pension age are needed in light of longer life expectancy and financial pressures facing the country.

Kendall has not ruled out raising the age at which people can start claiming the state pension, a move that could affect up to six million Britons. Here's what's being considered in the latest review.

State Pension Age Already Set to Rise

In the UK, the state pension age is currently 66 and is already due to increase to 67 by 2028, with a further rise to 68 scheduled between 2044 and 2046. However, this latest review could accelerate that timetable.

The government is required by law to examine the state pension age every six years, with the most recent review completed in 2023. Kendall's decision to bring forward this new review comes amid warnings that the state pension, in its current form, may become financially unsustainable.

'Many workers are more concerned about putting food on the table and keeping a roof over their heads than saving for a retirement that seems a long way away,' Kendall said. 'And many businesses face huge challenges in keeping profitable and flexible in an increasingly uncertain world.'

Millions at Risk of Delayed Retirement

Government projections suggest that approximately 800,000 people reach state pension age each year. If changes to the age threshold were brought forward to 2038, as was previously proposed by the Conservative government, it is believed that between five and six million people could be affected.

While any change would be subject to a ten-year notice period, Kendall made it clear that the government must address the financial reality of an ageing population.

'So many aspects of our life... haven't woken up to the fact that we are all living longer,' she said. 'As we live for longer, we were going to work for longer.'

Private Pensions and Savings Under Scrutiny

Alongside the review, the government has also launched a fresh commission to examine how people are saving for retirement. According to the Department for Work and Pensions, nearly half of working-age adults are not saving into a private pension, with 15 million considered to be under-saving overall.

To address this, a taskforce led by Labour peer Baroness Jeannie Drake will explore barriers to saving and propose reforms to improve pension outcomes. Kendall also hinted at possible new approaches such as 'sidecar funding,' which would allow workers to link emergency savings accounts to their pension pots.

Poverty Warnings and Growing Inequality

During a Q&A round after her speech, Kendall warned that the UK is heading toward a 'tsunami of pensioner poverty' if younger generations cannot afford to save now.

'My big worry is that so many young people have not got at the minute a hope in hell of getting on the housing ladder... if you are paying off your mortgage in retirement or still renting in retirement, that is what is driving this sort of tsunami of pension and poverty,' she said.

Research shows that women, ethnic minority groups, and low-income workers are disproportionately affected by current pension disparities. A DWP analysis found that women approaching retirement will receive less than half the private pension income of men.

What Are the Next Steps?

According to UK government, two independent reports, one from Dr Suzy Morrissey and another from the Government Actuary's Department, will inform the review. Findings are expected to consider life expectancy data, intergenerational fairness, and how best to support an ageing workforce.

While the industry has largely welcomed the review, it has also raised political sensitivities. Sir Mel Stride, the shadow chancellor, accused the governing party of pushing the pension age issue 'into the long grass.'

'The reality is they have piled up burdens on employers and workers, and that is why they have launched a pensions commission which will take years to report back and will only look at changes beyond the end of this decade,' he said.