Graduates face longer wait for state pension under reform plan

Student with fingers in ears

A two-tier state pension is being considered by the government, under which workers will receive a full provision of £155.65 for 45 years of national insurance contributions.

The controversial plans would be a blow for graduates, who would be forced to work longer than those in blue-collar jobs.

If the plans are given the green light graduates face working until they are almost 70. In contrast, those who leave school at 18 will be able to start drawing on the state pension at 63.

Others, including stay-at-home parents, carers and those suffering from long-term illness, would have their entitlements protected.

According to The Sunday Times, Damian Green, the work and pensions secretary, has backed the reform plans.


Early state pension access

Later this week Sir John Cridland, the former head of the CBI, will publish a report into the state pension age. The review will consider changes in life expectancy, wider changes in society and ways to help ensure the state pension remains sustainable.

Ahead of the publication (which is expected on 14 October), Hargreaves Lansdown has written to the review. The broker has proposed early access to the state pension based on life expectancy.

Hargreaves Lansdown's proposals include early access to state pension from age 60 for those in poor health, with the capital sum discounted to take account of early access.

Tom McPhail, head of retirement policy at Hargreaves Lansdown, says: “The state pension age needs to rise, in order to reflect general improvements in life expectancy across the population, because otherwise the whole scheme will eventually become unsustainably expensive.

“However, we also need to accommodate those with poor life expectancy. We could vary the state pension based on gender, post code, occupation or even ethnicity, but these are both arbitrary and in some cases illegal because they are discriminatory.

“A fairer and more efficient approach would be to use the underwriting expertise of specialist annuity providers, to target higher payouts to those individuals who have a lower life expectancy, whatever the reason for it.”

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