DWP issued state pension warning ahead of major decision - 'it would cause a firestorm'

An expert has warned that a "political firestorm" will erupt if Labour raises the state pension age to 68 or beyond. The state pension age is currently 66, but it will rise to 67 by 2028, it potentially could be increased further as early as the next decade.

Legislation currently says an increase of 68 will be between 2044-46, as set out by the Pensions Acts of 2014 and 2007 respectively. However, after Chancellor Rachel Reeves backed a review into raising the state pension age, arguing it is "right" to take another look at if the date could be brought forward. The review was launched on July 21. Tom Selby, director of public policy at AJ Bell, warns Brits in poorer households will feel the effect the most.

Speaking to the Express, Mr Selby said there is even potential for the age to be increased to "70 or even beyond," potentially impacting millions of Brits' retirement plans and making cash-strapped Brits work for even longer. The Exchequer and taxpayers would be the sole groups that would receive the awards, he said.

He said: "The potential benefits of accelerating that rise to 68 - or increasing it further, potentially to 70 or even beyond - are to the Exchequer and taxpayers.

"State pension age increases could save the Chancellor tens of billions of pounds, potentially meaning tax rises elsewhere are not needed.

"The downsides are that people will have to wait longer to receive their state pension, placing additional emphasis on private retirement saving.

"It would also cause a political firestorm, particularly in lower wealth parts of the UK where average life expectancy is lower.

"Frankly, it's hard to imagine either the state pension amount or age not being pared back in some way in the coming decades, which is something younger people in particular should be prepared for."

The accepted practice is to give 10 years' notice of any increase, so it's likely to be in the 2030s at the earliest before a move to 68, says Andrew Tully, a highly respected pensions expert at Nucleus Financial.

Speaking to the Express Mr Tully shares concerns with Mr Selby that Brits with a lower life expectancy and lower incomes will feel the pinch the hardest.

He said: "Raising the state pension age hits those with lower life expectancy hardest. That cohort contains a disproportionate number of those on lower incomes and those in poor health.

"We always need to remember that state pensions are paid for by the tax of current workers and there is a 'transfer of wealth' from younger people to older people.

"Each generation of pensioners will have supported the previous generation of pensioners during their working lives but a significant shift in the intergenerational balance could lead to unfairness."

The Chancellor has said a review into raising the state pension age is needed to ensure the system is "sustainable and affordable".

The review was announced by the Department for Work & Pensions in July and will involve an independent report, led by Suzy Morrissey, on specified factors relevant to the Review of State Pension Age, along with the Government Actuary's Department's examination of the latest life expectancy projections data.

The DWP has been contacted for comment.