The chancellor has announced that the state pension age rise to 67 will be brought forward by eight years to 2026.
In today's Autumn Statement, George Osborne revealed that the age at which people can claim the state pension will increase from 66 to 67 between April 2026 and April 2028. Under current law, the age was due to rise to 67 between 2034 and 2036, and then 68 between 2044 and 2046.
"Let's not leave it to our children to take emergency action to rescue the public finances; let's think ahead and take responsible, sensible steps now," Osborne said as he revealed the change.
"This will not affect anyone within 14 years of receiving their state pension today."
Justifying his decision, the chancellor said Australia, the US and Germany had all taken similar steps, and by bringing the rise forward it would save the government's coffers £59 billion. By saving this money, the basic state pension had a "long-term future", Osborne said.
The Office of Budget Responsibility's Fiscal Sustainability report forecasts that spending on state pensions will rise from 5.5% of GDP in 2015-16 to 7.9% of GDP in 2060-61.
Dr Ros Altmann, director general at Saga, says the increase from 2026 is not far out of line with other nations. "Around that time, the US, Netherlands, Germany, Denmark and Spain will all be increasing pension ages to 67 and Ireland's pension age will be 68. It also does give people around 15 years' notice which is fair, however it is really quite scandalous that the government refused to use some of the money saved to delay the original rise to age 66 that has just been passed into law," she comments.
Andrew Tully, pensions technical director at MGM Advantage, agrees that 15 years' notice should give people sufficient time to prepare. However he adds: "It's likely the increase to age 68 will also come sooner than the planned 2046."
Osborne also announced that the basic state pension would remain protected by the triple lock, which guarantees a rise either in line with earnings, prices or 2.5% – whichever is greater.
Next April the basic state pension will rise by £5.30 to £107.45, which the chancellor claims is the largest ever cash rise for the pension.
The full couple rate for those whose entitlement is based on their spouse's or civil partner's pension will rise by £8.50 to £171.85 per week.
To ensure that pensioners with the lowest incomes benefit from the triple guarantee, the standard minimum income guarantee in pension credit will increase by 3.9% in April 2012 to £142.70 per week for single pensioners and £217.90 a week for couples.
This will be paid for by raising the threshold for savings credit in April 2012 to £111.10 for single pensioners and £177.20 for couples.
Altmann comments: "Pension credit comes in two parts, the guarantee credit and the savings credit. In order to fund the extra rise in the guarantee credit (i.e. an increase above earnings inflation) the chancellor has decided to reduce the top level of savings credit. This is effectively transferring money from the poorer pensioners with savings, to the poorest pensioners without any savings."
This article was written for our sister website Money Observer