The state pension rules are changing (Image: Getty)
The state pension is at a defining crossroads as more changes may be needed to keep the policy affordable. The eligibility rules for the benefit are currently being tightened, with an expert warning the DWP scheme is at a “critical juncture”.
Key changes coming in now mean people already face a longer wait to claim the benefit, with the state pension age moving up right now from 66 to 67, between April 2026 and April 2028. Catherine Foot, director of the Standard Life Centre for the Future of Retirement, said this is just the latest of several sweeping changes to the state pension in recent years.
She said: “The state pension remains the foundation for most people’s retirement incomes. For 60 years, the UK state pension age for men and women didn’t change. But since 2010, we have had an era of a rising state pension age – gradually increasing to 67 for both women and men by the end of 2028.”
Critics of the current rules fear that with an ageing population and the triple lock driving up payments, the system will soon become unaffordable for the Government. Thanks to the triple lock, the state pension rises each April in line with the highest of either 2.5 per cent, the rise in average earnings or inflation.
‘Critical juncture’
Ms Foot said: “There’s no doubt the state pension is at a critical juncture with questions being raised regarding its long-term affordability and sustainability, with Dr Suzy Morrissey having a difficult task ahead of her in considering the factors the Government should consider in her soon to be published independent report.”
Labour announced in 2025 there would be another review of the state pension age. The Government has commissioned Dr Morrissey to produce an independent report with some recommendations, which it will then consider.
Ms Foot said: “Ultimately there is no ‘correct’ state pension age, but as a framework for its basis is considered it’s crucial that any changes do not risk deepening inequality and hardship for those least able to work for longer. Decisions should be based on a balanced assessment of life expectancy, affordability and fairness considering that, even at the current age of 66, working until state pension age is not easy or achievable for everyone.”
Changing population
One concern for the Government is that as the UK population gets older, there are fewer taxpayers paying into the system relative to the number of state pension claimants. Although you build up your state pension entitlement through your National Insurance contributions, there is no assigned pot that you pay into for your state pension.
So funding for the benefit comes out of general Government funds. Ms Foot said: “The UK’s demographics are gradually changing, and in the long term the proportion of the population above the state pension age is expected to increase.
“However, we also know that 15 million people are already not on track to save enough during their working lives for a comfortable retirement. Further rises in the state pension age would be likely to deepen inequality, given we know that about a quarter of all 60 to 65 year olds already live in poverty.”
Further increases planned
After the increase to 67 by 2028, the state pension age is set to go up again from 67 to 68 between 2044 and 2046. There has been discussion of moving forward this increase.
The OBR recently said this move should be accelerated, to happen between 2037 and 2039. But Ms Foot said this could worsen current problems.
She said: “While raising the state pension age further and faster than currently planned would impact everyone, it’s clear that the impact wouldn’t be felt equally, given the wide variations we see in life expectancy across the country. What’s more, in some parts of the UK, people are more likely to stop working earlier due to health conditions, disabilities or caring responsibilities – meaning they may experience financial challenges between leaving work and reaching state pension age.
“These structural inequalities deserve close attention in the independent report on the state pension age and future policy debates that follow it.”