Now we know the true cost of Labour hiking the state pension age.
Labour’s Liz Kendall could raise retirement age but there’s a price (Image: Getty)
New figures show that millions are set to lose nearly £18,000 overnight if Labour presses ahead with plans to push the retirement age even higher. And many will lose a lot more than that.
The state pension is 66 today but slated to start rising to 67 from 2026. Work and pensions secretary Liz Kendall has now brought forward a new review into the state pension age. This will examine when to lift the retirement age to 68, to keep it affordable as life expectancy grows but the economy is squeezed.
The retirement age was originally due to rise to 68 from 2044, but as I exclusively warned recently, Labour could bring that forward by five years to 2037.
The Institute for Fiscal Studies has already warned that the pension age might need to rise to 74 by 2068, thanks to spiralling public costs and demographic strain. Some say that one day it could hit 80.
Almost half of working-age adults are saving nothing for retirement, with 15million classed as “undersaving”. The low-paid, self-employed and ethnic minorities are especially vulnerable.
While this crisis has been brewing for years, Chancellor Rachel Reeves’s economic mishandling has brought it to a head.
Lifting the pension age is one of the few levers Labour has left to balance the books. Ordinary workers will foot the bill. Today, we’ve learned what that looks like.
Raising it by just one year costs millions a small fortune.
Workers aged between 51 and 53 today will be the first ones affected, missing out on a full year’s pension.
Those turning 53 this year will be the first affected, losing £16,918. A 52-year-old would miss out on £17,340 while those aged 51 will lose £17,774 – almost £18k.
Rathbone’s forecasts assume the state pension rises each year by 2.5%, in line with the triple lock backstop. If inflation or wages are higher than 2.5%, state pension losses could be bigger too.
Younger workers in their 20s, 30s or 40s will lose even more than £18,000, as the state pension will be worth even more by the time they hit 68. They’ll lose even more if the state pension age is subsequently hiked to 69, 70 or beyond.
Remember, this is money people were expecting, based on years of National Insurance contributions. But it may be snatched away at the stroke of a Treasury pen.
Rebecca Williams at Rathbones warned that today’s workers already face a far less generous retirement than their parents warning: “Cracks are beginning to show in the system.”
Chancellor Rachel Reeves is desperately struggling to balance the books, but she’s completely boxed herself in. She cannot cut spending after the disability benefits rebellion, while having to pour billions into housing illegal immigrants.
Reeves has pledged not to break her own fiscal rules or raise the big three taxes of income tax, national insurance or VAT.
The state pension triple lock is becoming increasingly expensive, but scrapping it would be political suicide. Pushing the retirement age ever higher is the easier option. It doesn’t affect people right away. But as Rathbones shows, when it hits, it hits hard.
Keir Starmer, Liz Kendall and Rachel Reeves will be long gone by then, with any luck. But millions of pensioners hit by these changes will be worse off for the rest of their lives.
