Could the state pension age really rise to 74? Why the ‘triple lock’ may mean a longer wait for younger workers

A new review of the state pension age has triggered speculation that it may have to rise substantially to contain rapidly rising costs. 

The state pension age is going to rise from 66 to 67 within the next couple of years, and the next increase after that is now officially up for debate.

The Government is required by law to review the state pension age every six years, so it has ordered two reports which will look at when to hike to 68.

But a recent report by independent think tank, the Institute for Fiscal Studies, warned that without reform of the state pension triple lock, the retirement age would have to rise to 74 by 2069.

Could this really happen? We explain what you need to know about the state pension age and why it could increase.  

What is happening to the state pension age?

The studies, one by the government’s actuary and the other by an independent expert, are expected to consider the link between when you can draw the state pension and life expectancy, intergenerational fairness, and the bill borne by taxpayers.

The state pension is currently almost £12,000 a year if you have paid enough qualifying national insurance years to receive the full amount.

The qualifying age will rise to 67 between 2026 and 2028. The next rise to 68 is technically not scheduled until the mid 2040s, which will affect those born from 6 April 1977.

The last two reports in 2017 and 2023 recommended speeding up the increase to 68, but the Conservative government ignored them, and current Labour leaders could do the same.

> How much does a comfortable retirement cost? What YOU will need

Will the state pension age have to rise faster? 

The Government has effectively, if not in so many words, told the experts working on the next two reports to operate under the assumption that the triple lock pledge will remain in place indefinitely.

This means that the state pension increases every year by the highest of inflation, average earnings growth or 2.5 per cent. The Government has promised to stick to the triple lock for the whole of this parliament.

Pension experts are weighing in on the chances of a state pension age rise to 68 in the near future, and the trade-offs with the triple lock in terms of the cost to taxpayers.

A recent report by the Institute for Fiscal Studies pointed to government modelling on how to limit public spending on the state pension to below 6 per cent of national income.

To achieve this AND retain the triple lock state pension guarantee, it worked out the state pension age would have to rise to 69 by 2048–49, and then jump to 74 by 2068–69 – which would be bad news for people in their 30s and younger now.

Nerves were also rattled lately when Denmark’s government moved to hike its retirement age to 70 by 2040.

Meanwhile, it is worth noting that the minimum pension age for accessing workplace and other private retirement savings is due to rise from 55 to 57 from April 2028.

Governments have in the past tended to keep the state pension and private pension ages roughly 10 years apart, so any future increases could well continue to happen in tandem. This combined with a faster rise in the state pension age could cause a serious headache for those hoping to retire earlier.

> In your 30s or younger? How to plan ahead for a higher state pension age

Triple lock is ‘elephant in the room’

‘The third state pension age review will be watched like a hawk by swathes of middle-aged workers,’ says Jason Hollands, managing director of Evelyn Partners.

‘The triple lock is not within the remit of the Commission, but it is in some respects another elephant in the room, as while it remains it seems inevitable that state pension ages must be raised.

‘That’s not so much a problem for wealthier savers who can fund a few years of retirement wholly from private income.

‘It’s more of one for less well-off workers who might have to work until and even beyond state pension age, and then also might not have as many years of life expectancy to draw on the state pension..

‘Would a lower state pension at an earlier age be fairer than a higher one at a later age? It’s a question worth asking.’

State pension costs are set to spiral

‘There is an increase to age 68 pencilled in for 2046, but a faster increase is definitely on the cards,’ says Rachel Vahey, head of public policy at AJ Bell.

‘The first two reviews of the state pension age advocated bringing this forward, but successive governments have treated the issue like a hot potato.

‘This latest state pension age review, however, may eventually force the government’s hand.

‘State pension benefits are one of the single biggest expenses for the Treasury and account for more than 80 per cent of the £175billion pensioner welfare bill.

‘Without policy intervention, state pension costs are set to spiral to nearly 8 per cent of GDP over the next 50 years based on the current trajectory, up from 5.2 per cent today.

‘The second state pension age review in 2023 recommended that the increase to 68 should be introduced between 2041 and 2043 to help reduce costs, although the government under Rishi Sunak opted not to commit to that timetable.

‘However, the new Labour government may feel it needs to consider the rise to age 68 more closely, particularly if it wants to demonstrate steps toward long-term fiscal prudence.’

Triple lock vs state pension age – a hard choice

‘The Government instructs the reviewers to assume “current policies regarding the entitlement and value of the state pension remain unchanged over the long term”,’ says Steven Cameron, pensions director at Aegon.

‘The future value of the state pension is currently set by the triple lock. The Government has not committed to retaining the triple lock beyond this Parliament but has instructed the review to assume it continues indefinitely.

‘While some may take comfort in this, it could be false comfort. The purpose of the review is to look at the age the state pension starts from and the role this plays in managing the long-term sustainability of the state pension.

‘As other reports have shown, the triple lock puts the long-term sustainability of the state pension under huge pressure. So the conclusions from the review may be that if the triple lock continues, state pension age will have to go up further and faster than if it didn’t continue.’

‘For those already receiving their state pension, any threat to the triple lock will be bad news.

‘But for those who haven’t yet reached state pension age, the consequence of an ongoing triple lock could be having to wait extra years before receiving their state pension.

‘That’s a hard choice, but it’s one we need to face up to as a nation. Undertaking this independent review will allow the Government to set out these choices to the voting public.’