Retirement experts have raised concerns about the future of the state pension. Analysts warn that people are not saving enough for their retirement. The comments come as a new report suggests some people may soon have to wait until their mid 70s to claim their state pension.

A new study by the Centre for Social Justice suggests current schoolchildren may not be able to access their state pension until the age of 75. The report suggests that the Government may need to restrict the qualifying rules for the benefit, as declining birth rates and rising life expectancy put mounting pressure on the DWP pensions system.

Moving to a state pension age of 75 would be a big jump from the current access age, which is 66. However, the qualifying age is soon moving up, increasing in stages from April 2026 to reach 67 by April 2028. Legislation has also been put in place for a further gradual rise from 67 to 68, currently set to happen between 2044 and 2046.

Pressures aren’t going away

Mark Pemberthy, benefits consulting leader at pensions advice group Gallagher, said of the new report: “You could argue that the conclusions may be pessimistic, and it is difficult to imagine that such a significant increase would be feasible from a political perspective.

“But the underlying data does point to the very real long-term cost pressures that make the UK state pension look unsustainable as it stands today. What is indisputable is that we’ve got an ageing population, rising costs, and a shrinking ratio of workers to retirees. Those pressures aren’t going away.”

With the access to the state pension tightening, building up your private pensions is becoming ever more important to provide your income in retirement. The Government brought in the auto-enrolment system in 2012, to ensure workers are paying into a workplace pension.

Under current rules, workers have to pay in a minimum of 8 percent of your salary into a workplace pension, often made up of a 5 percent contribution from the worker and a 3 percent contribution from the employer.

Not saving enough

But Mr Pemberthy said this often does not provide enough income without the state pension as well. He said: “Auto-enrolment contribution rates were designed to provide minimum retirement incomes when added to the state pension. It would not be able to replace the state pension as a primary source of retirement income without significant increase in contribution rates.

“It would also need a sufficient period of time for those higher contribution rates to build sufficient pension wealth to provide a retirement safety net is as valuable as the state pension. In reality, we know a significant proportion of working-age adults still aren’t saving enough even with the current state pension. As a result, we are generations away from that being an option even if radical changes were made now.”

He said there could be a move towards a “rebalancing” between the state pension and people’s private savings for their retirement. But he said there needs to be progress in terms of how much people are paying in and their understanding of how much they need for their retirement.

He warned: “Otherwise, there is a real risk that many Britons will lack the income to keep up their preferred standard of living in their golden years.”

What changes could there be for the state pension?

Mr Pemberthy said the most likely changes to the state pension system are “adjustments to the rate of future increase” and further increases to the state pension age, although he thinks a move to 75 “seems extreme”. State pension payments currently increase each April in line with the triple lock policy.

This lifts payments in line with whichever is highest: the rise in average earnings, the rate of inflation or a minimum of 2.5 percent. There have been concerns about the sustainability of this policy, especially after it has delivered some huge increases in recent years.

Payments rose by a record 10.1 percent in April 2023 thanks to high levels of inflation. State pensioners will get a 4.8 percent pay rise this April thanks to the metric.

Mr Pemberthy said: “Irrespective of what changes may be made, previous governments have committed to at least 10 years’ notice of any changes to the state pension to give people some time to adjust their plans, and the high-profile negative experience of the WASPI group highlights the importance of really clear communication of any future changes the Government makes.”