The call comes amid speculation that if a future Government commits to retaining the state pension triple lock, and set against likely future rises in life expectancies, further significant increases to the state pension age, up to age 74, may be needed to keep costs under control.
Aegon makes the case that the higher the state pension age is, the greater is the need to grant individuals the option to access it a few years earlier, subject to a reduction in weekly amount to make it financially fair.
Steven Cameron, Pensions Director at Aegon, comments: “Those above or close to state pension age may be hoping that all parties will commit to retaining the state pension triple lock in their pre-election manifestos. But this comes at a high cost to those of working age.
“The state pension age is due to increase to 67 in 2028 and currently, the plan is to increase it further to age 68 by 2046 but this could happen sooner. There is now speculation that if a future Government commits to retaining the state pension triple lock, and set against likely future rises in life expectancies, further significant increases in state pension age may be needed to keep costs under control.
“State pensions are a very costly part of Government expenditure and deferring when they start being paid would save Government, or future taxpayers who fund them, significant money. But these increases will be of major concern to those who simply feel unable to keep working till late into their 60s or into their early 70s.
“Rather than an ever-increasing single age, we’re calling for the Government to explore offering individuals more choice over when they can start claiming.
“The higher the state pension age, the more individuals will struggle to stay in work. This could be because of their health, a physically or mentally taxing job or caring responsibilities for elderly parents. We’re already seeing increasing numbers of over 50s exiting the workforce due to ill-health. An ever-rising fixed state pension age could become increasingly divisive and out of sync with today’s flexible private pensions world.
“While individuals can already choose to defer their state pension in return for a higher monthly payment, there’s no flexibility to start it from a younger age. We support giving people the choice to draw it up to three years earlier, at a reduced amount to make it financially fair for all. An alternative would be to commit to allowing access from not later than say age 68, at a lower amount, even if the state pension age increases thereafter.
“Some individuals rely heavily on the state pension and opting for an earlier, reduced amount could leave their retirement income below the current threshold for means tested benefits. To understand any impact on their eligibility to claim such benefits, individuals might first be required to take advice or guidance from Money Helper. But as automatic enrolment into workplace pensions continues to mature, millions more employees are building up an increasingly valuable workplace pension, with fewer solely reliant on the state pension, so with less risk of falling below the means tested threshold.
“A more flexible approach to state pension age would not only meet the more varied ways people now live their ‘Second 50’ including when they retire but would also go some way to alleviate the concerns of an ever increasing ‘standard’ state pension age.”
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