Commenting on the Labour manifesto Steve Webb said:
"The cost of cancelling planned state pension age increases is astronomical. These are eye-watering sums of money which would either have to be found from somewhere or added to the national debt. As we live longer, it is inevitable that state pension ages will have to rise, as they are around the developed world. It is unrealistic to suppose that as a nation we can afford to ignore the fact that we are all living longer."
Background
If the planned state pension age rises are to be scrapped under the Labour pension manifesto proposal:
• the planned rise from 66 to 67 due between 2026 and 2028 will not happen;
• the planned rise from 67 to 68 due between 2044 and 2046 will not happen;
The first of these changes will potentially affect everyone who reaches pension age between 2028 and 2046, who would receive the state pension at 66 instead of 67. This would impact roughly 650,000 people per year over an 18 year period, so 11.7 million people in total. Assuming each person misses out on a flat rate pension of £8,000 per year in today's money, that multiplies up to £93.6 billion.
The second of these changes could affect everyone who reaches pension age after 2046. Considering just today's workers (i.e. those aged 18 or over), this could be all those aged 18-37. This would be 650,000 people per year over a 20 year period, or roughly 13 million people. Each person would gain two years' worth of state pension or £16,000 each which would mean a total of £208 billion.
The total cost of the proposed policy is just over £300 billion - or nearly a third of a trillion pounds. This doesn't take into account economic damage caused by people retiring earlier than they would have done under the current schedule. In effect, this £300 billion would have to be added to the national debt or found in some other way.
These calculations assume around 650,000 people reach state pension age in any given year.
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