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The Actuary The magazine of the Institute & Faculty of Actuaries

Retirement delayed for Britain’s baby boomers

John Ball, head of UK pensions, said the move would affect retirement for the 1960s ‘baby boomer' generation. "Almost six million of them will now spend a full year less claiming state pensions," he said.

But Mr Ball pointed out that this group was still expected to claim for longer than the last government intended when it set the SPA at 66, due to rise in official estimates of life expectancy.

Towers Watson highlighted earlier Government talk of finding a "more automatic mechanism" to link the SPA to life expectancy after it reaches 66 in 2020. The firm believes the plans announced yesterday may provide a clue as to how this will work and therefore when the SPA could reach 68.

"According to official projections, average lifespans from age 67 in 2028 are expected to be 21.4 years for men and 23.9 years for women," said Mr Ball.

"That's the same as average life expectancy at 66 in 2020. If the Government wanted to keep this more or less constant going forward and put its faith in the official projections, it might increase the SPA to 68 by about 2036 - 12 years sooner than planned under current legislation."

Mr Ball said the ambition for longer retirements may be another casualty of straitened economic circumstances.

"Today's news is another reminder that what we get from the state in retirement will depend on what politicians decide is affordable. However, the Government is not trying to reverse the big increases in expected retirement lengths already seen."

"Once the SPA reaches 66 in October 2020, it will be frozen for five and a half years before rising again. This means that people born in 1959 might on average be expected to spend an extra six months or so in receipt of their State Pension compared with people born in 1961. Winning this year-of-birth lottery can be worth thousands of pounds."

Based on certain assumptions, Towers Watson calculates that the changes announced yesterday are likely to mean that:

• People born between 6 April 1961 and 5 April 1968 see their SPA rise by a full year

• People born between 6 April 1960 and 5 April 1961 see their SPA by less than one year

• People born between 6 April 1968 and 5 April 1969 see their SPA rise by less than one year (or potentially more than this, depending on subsequent announcements about when the SPA will start rising towards 68).

In a separate comment on yesterday's announcement, Saga director-general Ros Altmann said: "As life expectancy is rising it is inevitable that the state pension age will increase.

"Pension ages everywhere are rising. Today's announcement that Britain's state pension age will increase to age 67 starting from 2026 is not far out of line with other nations. Around that time, the US, Netherlands, Germany, Denmark and Spain will all be increasing pension ages to 67 and Ireland's pension age will be 68."