The state pension age for men and women will rise to 66 in 2020 saving more than £5 billion a year, Chancellor George Osborne announced today.
There will be a gradual increase from 65 to 66, starting in 2018, and the extra money will be used to increase the basic-state pension, currently £97.50 for a single person.
The retirement age for women had been set to go up from 60 to 65 between 2010 and 2020.
From 2016 the rate of increase will be three months in every four, rather than the previous plan of one month in every two.
Tom McPhail, head of pensions research at Hargreaves Lansdown, explains that men and women under the age of 57 at the start of this tax year will now have to wait until they’re 66 to receive a state pension.
The savings from increasing the state pension age will pay for the "triple guarantee" of the basic state pension, which means rises are based on earnings, prices or 2.5%, whichever is highest, from 2011.
Osborne said in the Spending Review: "Never again will those who worked hard all their lives be insulted with a state pension increase of just 75 pence. But this guarantee of a decent income in retirement has to be paid for at a time when people are living much longer than anyone predicted."
Ian Naismith, head of pensions market development at Scottish Widows, says: "Increases to state pension age are unavoidable as average life expectancy rises, and are preferable to cuts in the level of state pensions. They also send out an important message that the traditional retirement ages should no longer mark the end of our working lives."
The chancellor justified the increase to the state pension age by highlighting rising life expectancies combined with the massive UK deficit.