Falling life expectancy could help 20m pension savers avoid the threat of an increasing State Pension Age, according to actuarial pensions consultancy LCP.

New analysis of population projections by LCP suggests that the government’s plans to raise State Pension Age to 67 by 2028 and 68 by 2039 have been “blown out of the water” because expected improvements in life expectancy have failed to materialise.  

LCP says that if the government sticks to its policy of linking state pension age to life expectancy there would no case for raising pension age from 66 to 67 until 2051 – 23 years later than currently planned. 

Steve Webb, partner at LCP and a former Pensions Minister, said: “The Government’s plans for rapid increases in state pension age have been blown out of the water by this new analysis. Even before the Pandemic hit, the improvements in life expectancy which we had seen over the last century had almost ground to a halt.  

“But the schedule for state pension age increases has not caught up with this new world. This analysis shows that current plans to increase the state pension age to 67 by 2028 need to be revisited as a matter of urgency.  Pension ages for men and women reached 66 only last year, and there is now no case for yet another increase so soon.

"However this change alone would deprive the Treasury of at least £195bn in planned savings on state pension expenditure but could give a state pension age ‘reprieve’ to more than 20m people born in the 1960s, 1970s and early 1980s."

The Government is currently consulting on plans to bring forward rises to the State Pension Age to 68 from 2044 to 2037 due to longer lifespans, a rising population and the increasing cost of the State Pension.

However LCP says the government must factor in declining lifespans. Recent data has suggested that lifespans in some areas are falling and Covid-19 may also have reduced average lifespans.

LCP says that the Office for National Statistics published population estimates in 2016 and 2018 which revealed lower life expectancies than previously thought. For example, the 2014-based projections suggested that a 66 year-old woman could expect to live, on average, to around 89 whereas the 2018-based projections forecast woman of the same age would only to live to around 87.

LCP says the latest projections mean that any move in the State Pension Age from 67 to 68 would not be needed until the mid 2060s, rather than the mid 2040s as per current legislation, and certainly not by the late 2030s as planned by the government.

The move from 66 to 67, currently due to be phased in over two years between 2026 and 2028, could be put back 23 years to 2049-51, says LCP.

LCP added that a new round of ONS projections for 2020 - expected in the New Year - will be the first to reflect any potential long-term impact from Covid-19. LCP believes it is possible ONS may conclude that the pandemic could have a lasting negative impact on life expectancy, implying even further delays in state pension age increases and could intensify the political pressure to ditch the forthcoming move to age 67.