The retirement age debate – certainly in the UK – is one that has raged on over a number of decades, and relates to the point at which people are no longer expected to work, and when they can claim their State Pension. There are ongoing arguments around raising the retirement age, lowering the retirement age, or abolishing the retirement age altogether.
The current retirement age, in this country, is 66 but is due to rise to 67 in 2028, with the Government defending this on the basis that the UK has an aging population and, with free access to healthcare and improvements in medical science, people are simply living longer.
In short, they argue that they’re trying to make the State Pension system more sustainable in the long term.
This has been a hot topic for quite some time, but particularly in recent years, with politicians from both sides of the political spectrum, and the general public, arguing the pros and cons of raising or lowering the State Pension age.
The pension age debate often divides opinions.
Those in favour of raising the retirement age point out that people are living longer healthier lives, so can work for longer; working longer/until a later age gives them longer to save for retirement; hiring older people will lead to more diversity in the workforce; it’s the only way to ensure the State Pension system can keep going.
However, those against raising the retirement age say that it will put undue pressure on people’s health, both physical and mental; it will make life much harder for those who do physically demanding jobs, such as work involving manual labour; it will lead to an increase in unemployment among older people (leading to a separate debate on ageism in the workplace); it adversely affects certain groups who have a lower life expectancy than others.
The current Government has said that it’s committed to keeping the State Pension age under review and will make a decision about whether to bring forward the rise in the retirement age to 68 in the first two years of the next parliament – so, from 2025 onwards.
Whatever the case, the retirement age debate is set to rumble on.
If you raise the retirement age, are you unfairly penalising some people?
If you lower the retirement age, is the current State Pension system sustainable?
If you abolish the retirement age entirely, when will people choose to retire?
This blog post aims to expand on this often complex debate and break it down, covering the history of retirement age in this country, the State Pension system, how to claim your State Pension and how much you’ll receive, the State Pension age review, the impact of lowering or raising the retirement age on the workforce and certain industries, and the effects on individuals and society as a whole if the retirement age changes. Read on we’ll discuss everything you need to know about the retirement age debate in the UK. Also, explore our blog post on Indeed Flex’s workplace pension and payroll schedule for a broader perspective on financial planning.
Historical background of retirement age
The concept and history of the retirement age in the UK
Although the pension age debate seems to have been going on forever, the concept of a retirement age is relatively new, in terms of human history.
Right up until the 19th Century, people simply worked until they died or were unable to work any more – hard to believe, but true.
But as living standards improved towards the latter end of that century and, as a result, life expectancy increased, the notion of a specified retirement age came to the fore, until, finally, in 1908, the first government-funded pension scheme was introduced.
Initially, this scheme was only available to certain groups of people, such as civil servants and teachers. However, in 1948, the National Insurance Act was passed, which introduced a State Pension system for all working people, whatever their job.
The State Pension age was initially set at 65 for men and 60 for women. However, in 1995, the Government announced that it would make that age 65 for both men and women. This change was phased in between 2010 and 2020.
Bringing things right up to the present day, the State Pension age is currently 66 for both men and women, but it is due to rise to 67 in 2028 and 68 in 2046.
In addition to the State Pension, many people in the UK also have private pension savings. This allows them to retire at an earlier age than the State Pension age, or to supplement their State Pension income.
An overview of the State Pension system
The State Pension system in the UK works on the basis of pay-as-you-go, which means that workers pay National Insurance contributions, taken out of their monthly or weekly wages.
To be eligible for the State Pension, you need to have at least 10 qualifying years on your National Insurance record, but you can get up to 35 qualifying years.
The more qualifying years you have, the higher the amount paid out as your State Pension will be.
The full new State Pension is currently £203.85 per week. However, the average weekly amount paid out in 2022/23 was £175.20 per week.
If you’re married or in a civil partnership, you may be able to increase or inherit a State Pension from your spouse or civil partner. You may also be able to increase your State Pension if you have a child.
Your State Pension doesn’t kick in automatically. To claim it, you need to apply to the government, which you can do online, by phone, or by post.
The State Pension age review
What exactly is the State Pension review?
The State Pension age review is a periodic review of the age at which people are eligible to receive the State Pension. This is required by law and is intended to ensure that the State Pension remains sustainable and fair across the generations.
The review takes into account a number of factors, including life expectancy, labour market trends, and the state of public finances at the time of review. The government also considers the views of those who need to be consulted on any potential changes, such as pensioner groups, age-related charities, trade unions, and businesses.
The most recent State Pension age review was published in November 2023 and concluded that the State Pension age should increase from 66 to 67. This increase is due to take place between 2026 and 2028.
However, the government will review the evidence again, within two years of the next Parliament (so, from the beginning of 2025 onwards, based on UK election cycles) to reconsider this age increase.
The retirement age debate: different perspectives
The argument for raising the retirement age
Although it’s a somewhat contentious issue, many people believe that it’s a good idea to raise the retirement age, both for the benefit of the individual and for the wider society.
Those in favour of raising that age often put forward a number of points in support of their case – the main ones being:
- It ensures the long-term sustainability of the State Pension system. As people live longer, there are simply more of them drawing a State Pension for longer periods of time. This puts a strain on the government’s finances. Raising the retirement age can therefore help to reduce the cost of the State Pension system.
- People who work longer pay more taxes, therefore increasing government revenue. This could be used to fund other public services or to reduce the government’s budget deficit.
- As the population ages, there are fewer people of working age. Raising the retirement age can help to increase the number of people in employment, which can, in turn, boost economic growth.
- It allows people to work longer if they want to. Some people want to continue working past the current retirement age because they enjoy their work or because they need additional income. Raising the retirement age gives people more flexibility to choose when they retire.
- It could reduce poverty among older people. The State Pension is the main source of income for many older people, and raising the retirement age could help to ensure that they have a sufficient income in retirement, as they would’ve been contributing to their pension fund that little bit longer.
- It may well improve the health and wellbeing of older people. A number of studies have shown that people who work longer tend to be healthier and happier.
So, those are the potential benefits of raising the retirement age, but what about the arguments for lowering the retirement age?
The argument for lowering the retirement age
While there are many people who think the retirement age should be increased, a significant number feel it should actually be lowered, as working later in life may disadvantage people in a number of ways, and – in contrast to the opinions above – not to the benefit of the individual or for wider society.
Again, there are a number of points to consider when it comes to the pros of lowering the retirement age, such as:
- Giving people more choice and control over their lives. Some people may want to retire early to pursue other interests, such as spending more time with family and friends, travelling, or pursuing particular hobbies or lifelong passions.
- Improving the health and wellbeing of older people. In contradiction to the same point made in respect of increasing the retirement age, some studies have shown that people who retire early tend to be healthier and happier than those who work until the standard retirement age. Lowering the retirement age would enable people to retire when they are still healthy and active, allowing them to enjoy their retirement years more fully.
- Reduced unemployment. Raising the retirement age may well see older workers displaced by younger workers, increasing the rate of unemployment for those aged 60 or above – leaving them reliant on the welfare system and payments such as Universal Credit. Lowering the retirement age means that this is less likely to be the case.
- Avoidance of a slowdown of economic growth. Older people, in general, tend to consume less than younger people. Raising the retirement age could lead to reduced consumption, whereas lowering the retirement age would have the opposite effect.
- Reduced inequality. Lowering the retirement age could prevent low-income and manual workers from being disproportionately affected, particularly if they work in physically demanding jobs, which will become harder as they age.
- Lower demand for healthcare and social care services. Making people work until a later stage in their life, may well mean that they need more frequent access to healthcare and social care services, putting a strain on the government’s budget and leading to higher taxes. Decreasing the retirement age would go some way to easing this pressure on already-stretched public services.
So, that’s the pros and cons of both raising and lowering the retirement age covered, but what about something radical? What about abolishing the retirement age altogether?
The argument for completely abolishing retirement age
Perhaps even more controversial than raising or lowering the retirement age in the UK is the notion that there simply shouldn’t be a set retirement age at all – that it should be completely abolished.
It’s a difficult debate to navigate as some people may feel they don’t want an age limit put on when they retire, as they enjoy their work and it keeps them active. Others, meanwhile, may feel that due to their financial circumstances, they have no choice but to keep working until later in life, regardless of the government’s position on the matter.
Again, there are a number of points often put forward by those in favour of abolishing the retirement age, such as:
- Giving people more freedom and flexibility. People should be able to choose when they want to retire, based on their own individual circumstances, such as their health, financial situation, family commitments, and personal preferences.
- A reduction in cases of age discrimination. The current retirement age system can lead to age discrimination, as older workers may be forced to retire even if they are still capable of working. Some employers may not even consider them if they apply for certain roles. Abolishing the retirement age would help to avoid this from happening.
- It may well improve the economy. Older workers tend to have more experience and knowledge than younger workers, or be familiar with systems and processes that younger workers know nothing of. Abolishing the retirement age would allow older workers to continue contributing their skills and would help to boost economic growth.
- Improvements to social care, or less strain on the social care system in general. As the population ages, the demand for social care services increases. Abolishing the retirement age would allow older people to continue working and to contribute to their own social care costs, reducing the burden on the government.
- Increased financial security, in some instances. For some people, retirement is financially challenging, and the option to work beyond a traditional retirement age can provide greater financial security and independence in later life.
- The promotion of healthy ageing. Studies have shown that people who continue working in later life tend to be healthier and happier than those who retire early. They’re more cognitively engaged, as a result of having to think on a daily basis, and less likely to suffer from chronic illnesses. Abolishing the retirement age would encourage them to stay active and engaged in work.
So that’s (probably) the most controversial of the three arguments covered in relation to the retirement age debate, but what about public opinion Vs government opinion? And what do they do, in relation to retirement, in other countries?
The retirement age debate in the UK
Public opinion on the retirement age debate
Somewhat unsurprisingly, public opinion on the retirement age in the UK is divided, with no clear consensus on what the right thing to do is. According to a recent poll by YouGov, 49% of Brits believe that the retirement age should be raised, while 38% believe that it should be kept the same or lowered. The remaining 13% are unsure. In addition to these stats, certain groups have particular opinions on the matter – for example:
Age: older people are more likely to oppose raising the retirement age, while younger people are more likely to support it.
Gender: men are more likely to support raising the retirement age than women.
Education: people with higher levels of education are more likely to support raising the retirement age.
Region: people living in London and the South East of England are more likely to support raising the retirement age, while people living in other regions are more likely to oppose it.
It’s a complex and nuanced debate and, overall, there are a number of factors that influence public opinion on the retirement age. Some people believe it should be raised to ensure the sustainability of the State Pension system, while others believe it should be lowered to give people more flexibility to choose when they retire. There’s also a concern about age discrimination in the workplace, as previously mentioned.
That’s the opinion of the British public, but what about those in a position of power – those who actually make the decisions regarding retirement age and the State Pension?
Government opinion on the retirement age debate
The Government’s current stance on the retirement age is pretty clear: they feel that it’s necessary to raise the retirement age in order to ensure the sustainability of the State Pension system and to increase the number of people in the UK workforce.
They’ve concluded that the current retirement age of 66 is not sustainable in the long term, as the population ages and the number of people drawing on the State Pension increases. They’ve also stated that raising the retirement age will help to boost economic growth by increasing the workforce participation rate.
As a result of these conclusions, the retirement age will gradually rise from 66 to 67 between 2026 and 2028, and then from 67 to 68 between 2044 and 2046.
In raising the retirement age, the current Government has recognised that this could have a significant impact on individuals, both financially and personally, so they’ve looked to introduce certain measure to counter this, such as:
- A phased increase in the retirement age, across a number of years
- Support for older workers, such as additional training
- A State Pension top-up for low-income pensioners
The Government’s stance on the retirement age will most likely change as the population continues to age and the State Pension system comes under increasing pressure.
But one thing they’re clear on is that they’re committed to raising the retirement age in order to protect the State Pension system and the interests of future pensioners.
Comparisons to other countries
When considering the retirement age debate as a whole, it’s worth looking at what other countries do, outside of the UK, and their stance on the matter.
Overall, there’s a general trend towards raising the retirement age worldwide, as populations age and governments seek to ensure the sustainability of their own, individual pension systems.
Here’s a brief overview of the retirement age in a few other countries:
United States: the full retirement age in the United States is 66, but people can start receiving Social Security benefits as early as 62. There’s no mandatory retirement age in the United States, but many employers have set retirement ages at between 65 to 70.
Canada: the normal retirement age in Canada is 65, but people can start receiving Canada Pension Plan benefits as early as 60.
Australia: The retirement age in Australia is 67, but is due to increase to 70 in 2035.
Japan: The retirement age in Japan is currently 65, but it is scheduled to increase to 67 in 2027.
Germany: The retirement age in Germany is 65 at the moment, but will increase to 67 in 2029.
France: At the moment, the retirement age in France is 62, but is due to increase to 64 in 2030.
Italy: The retirement age in Italy is currently 67, but there are a number of exceptions and early retirement options.
While the retirement ages in different countries are close to those set in the UK, they’re not a fixed number. In some countries, the retirement age is linked to life expectancy and increases automatically as people live longer. In other countries, the government has the power to adjust the retirement age as needed.
Much like in the UK, the debate over the retirement age in other countries is likely to continue for the foreseeable future, with many variables coming into play as governments look to balance the financial viability of their pension systems with the need to consider what’s right for their people.
The retirement age debate: in conclusion
The retirement age debate – intrinsically linked to the pension age debate – is somewhat complex, involving many different opinions on what’s right and wrong (and why), and a number of different considerations for successive governments to take into account.
There’s the historical context to how we reached this point in the first place and why both a retirement age and State Pension were introduced in the UK.
Then there’s the State Pension system itself. Is it fair? Should some people pay more than others, in terms of their monthly or weekly contributions? Is the amount available enough to live on? Should the State Pension age be reviewed more frequently?
And where do you sit on the whole argument as to whether the retirement age should be raised, lowered, or completely abolished? With people living longer than they used to and an ageing population, is it feasible to lower or abolish the retirement age? Would changing the retirement age in either direction lead to possible age discrimination on the jobs market? What are the economic and health implications of people retiring earlier or later?
And when it comes to the stats in terms of public opinion, where do you sit: do you agree with the Government’s stance or think that they’ve got it completely wrong?
One thing’s for sure: this isn’t a debate that will be resolved any time soon and there doesn’t appear to be a general consensus on what’s right and what’s wrong.
