Phoenix Insights has published a report on the implications of the SPA review.
The government recently published and responded to the second independent review of the SPA that was conducted by Baroness Neville-Rolfe last year. The purpose of these periodic reviews is to consider whether the current rules about pensionable age are appropriate, in particular given changes in life expectancy. The independent review recommended increasing the SPA to 68 sooner than is currently legislated (albeit not as soon as was recommended in the first independent review that was conducted by John Cridland in 2017). The government has responded by instead announcing that a further review will be undertaken within two years of the next parliament to reconsider the rise to age 68.
Frontier Economics supported Phoenix Insights in exploring the impact of an earlier increase in the SPA to 68 and identifying policy changes needed to support those most adversely impacted by such a reform. In our analysis we utilised data from the Phoenix Insights Longer Lives Index which provides valuable information on the current retirement expectations, resources and confidence of those who might be impacted by an increase in their SPA.
Our key findings suggest that:
- Over 3 million people would be affected if the increase to 68 were to occur between 2041 and 2043 as recently recommended by Baroness Neville-Rolfe.
- Those missing out on a year of the full state pension as a result would lose over £10,600 in income.
- For many, retiring later or using other savings to spread this income loss over the whole of retirement will be the default responses.
- Those that work for longer are likely to be better off financially as a result. This would help address the issue that 44% of defined contribution pension savers potentially affected by the increase in the SPA are currently not on track to be able to afford the retirement they expect.
- But not everyone will be able to work longer. Around 30% of those potentially affected by the increase in the SPA are already not confident of being able to work until their planned retirement age.
- Among those unable to work for longer only some will have other financial resources they can draw on to tide themselves over. People who are reliant on the benefit system at age 67, for example because they cannot find a suitable job or because they are in ill-health, will suffer from the much lower generosity of working-age benefits as compared to state pension levels.
- These groups in particular may need additional targeted support to avoid an increase in their SPA having a significant adverse impact on their standard of living.
To find out more about our findings and to read the report in full, click here
Frontier regularly advises on issues in the financial services sector.
For more information, please contact email@example.com or call +44 (0) 20 7031 7000.