State pension age review: 1 in 6 would consider taking state pension early at reduced rate

Tom Selby
22 April 2022

•    An independent call for evidence, which will play a pivotal role in future UK state pension age changes, closes on Monday (25 April) (Second State Pension age review: independent report call for evidence - GOV.UK (
•    Under current legislation the state pension age will increase to 67 by 2028 and 68 by 2046
•    The previous Government proposed accelerating the increase to age 68 by 7 years – although this hasn’t yet been written into legislation
•    Around 1 in 6 Brits would consider early state pension access at a reduced rate if the option was made available, an independent survey commissioned by AJ Bell reveals*
•    Government urged to prioritise simplicity, certainty and good communication when setting state pension policy

Tom Selby, head of retirement policy at AJ Bell, comments:

“If what we have seen in the French presidential debates is anything to go by, proposed increases to the UK state pension age could be a political lightning rod at the next general election.

“In France, President Macron is proposing increasing the state pension age to 65, while his opponent Marine Le Pen says it should remain at 62 for the majority – and reduce to age 60 for those who start work before age 20.

“In the UK, the state pension age is scheduled to increase to 67 by 2028 and 68 by 2046. The previous Government set out plans to accelerate the increase to age 68 by 7 years, but this has yet to be written into legislation.

“Given recent data points to a slowdown in life expectancy improvements, with some regions of the UK seeing average life expectancy go backwards, any move to increase the state pension age will inevitably be hugely controversial. 

“On the other side of the coin, a Chancellor nursing a £400 billion black hole in the public finances will likely have serious reservations about pushing back planned state pension age rises or halting them altogether.”

State pension early access – pros and cons

“If the Government wants to provide extra flexibility in the state pension system, it could examine the case for allowing people to access their state pension early at an actuarially fair reduced rate. This could help those with limited life expectancy receive a larger amount of state pension income. 

“It could also be relatively simple to implement, mirroring existing flexibilities which allow people to defer receiving their state pension.

“However, there would also be challenges, most notably to the Exchequer if large numbers of people rushed to access their state pension earlier. If healthy people accessed their state pension early at a lower rate, they may also face more severe income challenges in later life. 

“An independent survey commissioned by AJ Bell suggests the idea could receive some popular support. Around 1 in 6 people said they would be interested in early state pension access at a lower rate if it was available, with a further 29% saying they were unsure.”

Postcode pensions – an absolute nightmare 

“A number of other options have been posited which could make the state pension fairer. For example, some have suggested that setting state pension age based on someone’s postcode should be considered, to reflect the fact life expectancy in different parts of the country vary significantly.

“Any policy decision on the state pension needs to balance fairness against complexity. The more you try to make the state pension system fair, the more difficult it becomes for ordinary people to understand and navigate. 

“State pensions based on postcodes would be a nightmare to implement, cause horrendous complexity and possibly perverse actions, and would inevitably be hugely costly to administer. 

“We would strongly urge the Government to err on the side of simplicity. Automatic enrolment is enabling millions of people to get into the saving habit for the first time. As engagement with these pensions builds, it is vital people know what they are likely to get from the state and when.

“Simplicity, certainty and good communication are all absolutely essential in building and maintaining trust in pensions.”

*Source: Independent survey by Findoutnow for AJ Bell of 1,110 UK adults carried out on 17 February 2022

Tom Selby
Head of Retirement Policy

Tom Selby is a multi-award-winning former financial journalist, specialising in pensions and retirement issues. He spent almost six years at a leading adviser trade magazine, initially as Pensions Reporter before becoming Head of News in 2014. Tom joined AJ Bell as Senior Analyst in April 2016. He has a degree in Economics from Newcastle University.

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