Published On: Thu, Feb 8th, 2024

Hiking state pension age to 71 is ‘poison’ but we might just have to swallow it | Personal Finance | Finance

From 2026, it will start rising once again to 67, then to 68 from 2044 (and in my view, sooner than that). Now the International Longevity Centre has said we urgently need to increase the retirement age to 71.

The change needs to be made quickly. Under its proposals, the new higher retirement age would apply to everyone born after April 1970.

The retirement age is only going one way, and that’s up, up, up.

Complain all you like, but as the ratio of workers to pension falls, the state pension will only get more unaffordable unless we take some radical action.

There are no easy answers as the population gets older and birth rates fall, so let’s stop pretending otherwise.

In 2000, the over-65s made up 21.1 percent of the population. By 2050, that will have climbed to 51.1 percent.

We have to do something, if we want the state pension to survive at all, but none of the measures are pleasant.

It’s case of choose your poison.

The underlying problem is that the state pension is built on a lie. Workers believe they deserve it because they’ve paid into the system for years, and I don’t blame them.

The problem is that there is no big pot of cash waiting to fund your pension or mine.

It’s all been spent.

Today’s pensions are being paid by today’s workers, from their earnings.

As the ratio of workers to pensioners inexorably falls, there won’t be enough tax revenues to afford it.

So what do we do?

Hiking the state pension age to 71 is a ridiculous notion, of course. Only one in 10 Britons are healthy enough to carry on working into their 70s.

Many struggle to plough on in their 50s these days. 

The move will hit the poorest hardest, as they tend to have the most health problems and lowest life expectancy. 

Many already don’t live long enough to get their state pension today. They get nothing despite making years of National Insurance (NI) contributions.

The idea that they will now have to work on until 71 is a nonsense.

In practice, most of the money saved will only end up going on disability benefits like the Personal Independence Payment, now claimed by around three million (and rising sharply).

There are other solutions. Axing the state pension triple lock is another one that keeps rearing its ugly head, despite its success at lifting millions of pensioners out of poverty.

The Treasury would love to drop that commitment, believe me. Politicians would be happy to oblige, if they only knew how to get elected afterwards. The backlash would be huge.

READ MORE: State pension warning that minimum age could rise to 71 years old

Other suggestions include means testing the state pension so the wealthy won’t get it, but that will be horrendously complicated.

It would also mean those who have paid most into the system get least, further undermining the whole creaking edifice.

Or we could fund it via a wealth tax, but that will also be complicated.

Some have suggested increasing the amount of NI contributions workers need to make in order to qualify for the full state pension.

Currently, it’s 35 years, previously, it’s been as high as 44 years.

One thing we cannot do is let the burden fall on the young. They’re already burdened with massive student debt, stagnating wages and sky-high house prices.

Most simply won’t have the money. Plus with rising mental health issues, many can scarcely carry on working in their 20s, let alone their 70s.

Rampant immigration isn’t an answer, because immigrants grow old, too, and will want their state pension. That’s just a Ponzi scheme.

So yes, let’s all work later in life, if we can. However, if the state pension age is going to rise and rise, it has to be made more flexible, so those who are too ill to work can draw it at an earlier age, albeit at a reduced amount.

Anything else would be too unfair.

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