Jessica Fino 23 Mar 2017 05:01pm

State pension age should rise to 68 by 2039, review says

Millions of workers may need to work an extra year before they can collect the state pension, according to a review by former CBI director general John Cridland

Cridland, who was appointed by the government to carry out an independent review into factors affecting the future state pension age timetable, recommended it should increase from 67 to 68 by 2039, seven years earlier than currently planned.

His report also said that the state pension age should not increase more than one year in any ten-year period.

Meanwhile, the government's actuary department released a report on the state pension age on the same day.

It was asked to consider two scenarios for the state pension age, reflecting someone spending either 32% or 33.3% of their projected adult life in retirement.

Under a 32% scenario, it found that the state pension age could rise to 69 between 2040 and 2042. Meanwhile under a 33.3% scenario, the age could rise to 69 between 2053 and 2055.

The state pension age is currently 63 for women and 65 for men, but this is expected to rise to 65 for both by late 2018, 66 by 2020, and 67 by 2028.

The government is expected to review the state pension age - which sets out the earliest age that a person can start receiving their state pension - in May this year.

But while the next increase to 68 was legislated in the Pensions Act 2007 and is due to take place by April 2046, Cridland said that life expectancy projections have since changed.

He explained that forward projections for the public finances suggest that they are, and will continue to be, under pressure, meaning the 2046 date will need to be pulled forward.

“A judgement on this can be made now, and we believe that there is merit in giving future pensioners as much forward notice of this change as is possible,” Cridland added.

Last year, a two-year review carried out by professor David Blake, director of the Pensions Institute at Cass Business School, found that future pensioners risk a poverty-stricken old age unless they put 15% of their lifetime earnings away for their retirement.

Moreover, it emerged this week that one in seven people reaching state pension age this year have no pension savings.