The government will bring forward an increase in the state pension age to 67 under radical plans designed to prolong the working life of millions of people aged 50 and under.
Under the Pensions Act 2011 women’s State Pension age will increase more quickly to 65 between April 2016 and November 2018. From December 2018 the State Pension age for both men and women will start to increase to reach 66 in October 2020.
The Government has declared its intention to accelerate and extend these increases and the Pensions Act 2011 brings forward the implementation of age 66 to 2020. It has announced further legislation to raise the State Pension age to 67 by 2026 and said further increases will follow based on demographic evidence.
Tesco, the country’s largest private sector employer, is to raise its pension age from 65 to 67 in a move which could be followed by other major companies.
A company spokesman said that when the first Tesco scheme was created in 1973, the company expected pensioners to live until 77 on average. Now, a 40-year-old Tesco employee is expected to live until the age of 90. She said that under the scheme staff can still retire at 65, but they would not receive their full pension.
Tesco operates a famously generous defined-benefit pension scheme, which offers a predetermined monthly payout based on career earnings, and the moves are likely to be met with opposition. The scheme has 293,000 members, including 172,000 active workers.
Joanne Segars, chief executive of the National Association of Pension Funds, said: “Asking staff to retire later and using the CPI measure of inflation are ways of making pensions like this more sustainable. Tesco certainly won’t be the last to look at these options.”
Looking further ahead, the state pension age is likely to rise to 68 – and possibly even to 70 – as ministers consider linking it to rising life expectancy. As a result, women whose own mothers retired at 60 could be working up to a decade longer before finally being able to claim their pension.
Women were to be the biggest losers, with around 2.6 million having to wait longer before their state pension begins to be paid. Of that total, around 500,000 would have had to wait more than a year than they expected and 33,000 would have had to wait two years.
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