Increasing the UK state pension age to 70 would require additional savings.
The debate over increasing the UK's state pension age gains momentum, following Denmark's recent decision to raise its retirement age to 70 by 2040. At present, the UK state pension age is set at 66 and is scheduled to rise to 67 by 2028 and 68 by 2046. However, financial analysts and planners argue that further adjustments might be necessary due to demographic changes and rising life expectancies.
The Scandinavian nation tied its official retirement age to life expectancy in 2006 and has made subsequent revisions every five years. Currently at 67, the age will rise to 68 in 2030 and 69 in 2035, while residents born after December 31, 1970, are required to wait until they are 70 to claim pension benefits in Denmark.
Ian Futcher, a financial planner at Quilter, expressed caution about increasing the state pension age as it may affect a significant number of people who feel their life savings goals are being shifted during an era of growing wealth inequality between generations. Yet, he acknowledged the need to address rising pension costs as governments in developed countries confront aging populations and potentially shrinking tax bases.
Quilter's calculations suggest that the shortfall created by a later state pension age, such as raising it from the current planned 68 to an hypothetical increase to age 70, would amount to around £13,900 per year for the two-year gap. To compensate for this shortfall, an individual who retired at 65 and had the state pension begin at 68 would require a pension pot of £435,237. If the state pension were not received until age 70, the required pot would increase to £459,201.
Futcher went on to say that, given the state pension's current size and potential increases, the UK government will eventually have to choose between changing the triple lock or raising the state pension age. He emphasized the importance of individuals reevaluating their pension plans and boosting their contributions to secure their retirement.
Recent social security statistics show that more than half (55%) of UK expenditure on social security benefits goes to pensioners, with the government spending £174.9 billion on benefits for pensioners in 2025 to 2026. This includes the projected £145.6 billion for the state pension in the same year. The high cost of the state pension, along with the triple lock mechanism that ensures increases based on inflation, earnings, or 2.5%, whichever is highest, puts pressure on the government to devise solutions to maintain the system's long-term sustainability.
In light of the escalating debate about raising the UK's state pension age, financial analysts like Ian Futcher of Quilter suggest that people should reevaluate their personal-finance plans and boost their pension contributions to ensure a secure retirement. The potential increase in state pension age, such as from the current planned 68 to 70, could lead to personal savings shortfalls, with an individual requiring a pension pot of approximately £435,237 or £459,201, respectively, to bridge the gap.
