State pension age bombshell as amount handed to savers 'could be reduced'

Brits have been warned that the state pension age and amount will need to be changed in order to avoid tax hikes. Ahead of the government's third state pension review, ministers will consider the link between pension age and life expectancy. The state pension age is reviewed every six years and is due to rise to 67 between 2026 and 2028. This is expected to increase again to 68 between 2044 and 2046.

As life expectancy grows, it is estimated that a quarter of the UK's population will be aged 65 or older by 2050. Current calculations show that men aged 66, on average, are predicted to live for another 19.2 years, while women are projected to live for another 21.8 years. Both are expected to increase a further 1.9 years by 2050. Soon-to-be pensioners have now been warned that the state pension may be hiked up to avoid reducing payments.

Stephen Lowe, group communications director at retirement specialist Just Group warned that the government may need to "moderate the amount paid" to avoid hiking up tax rates.

He told the Financial Times: "If the government wants to avoid increasing taxes or means-testing the state pension then it may have to look at options either to increase the age at which people receive the state pension or to moderate the amount paid."

He said: "So, if the government either limits the amount paid or pushes out the age at which the state pension age can be claimed, then some people will face a wider financial gap than they planned and will need to cover it from their own resources."

David Pye, a client consulting director at financial services consultancy Broadstone, added that if the state pension "amount provided is reduced" it would reinforce the need for "urgent reform".

"With an ageing population, previous governments have almost exclusively used an increasing state pension age to control costs - especially at a time of creaking public finances," he told the newspaper.

My Pye continued: "If the state pension age is increased or the amount provided is reduced or means-tested, it will only reiterate the need for urgent reform in the private savings landscape to ensure adequate incomes at retirement."