Britain’s youngest workers face having to work until they are 70, under plans to be unveiled today by the Chancellor.
Millions more will not be able to retire until they reach 69.
The new formula, which means the state pension age will rise as average life expectancy increases, will be published in George Osborne’s Autumn Statement today.
He will announce that the state pension age will be moved to 68 in the mid-2030, 69 by the end of the 2040s and is likely to rise to 70 by 2060.
This follows previously published plans to increase the retirement age to 66 in 2020 and 67 in 2028.
The move, designed to ensure workers can expect to live no more than a third of their life in retirement, is part of a plan to cut the state pension bill by £500 billion.
Mr Osborne is also set to announce another £3 billion in cuts over the next three years in today’s Autumn Statement.
Treasury sources have insisted Scotland will be mostly shielded from cuts, but the Scottish block grant will be cut by 0.2 per cent.
The impact is less than it would otherwise have been because the UK government continues to protect spending on schools and health – both devolved areas. Other Whitehall departments, apart from International Development, will have to make savings of 1.1 per cent.
The plans to be unveiled today will be based on current average life expectancy estimates in the UK. The move is likely to play into the hands of the SNP, who have promised to bring down the retirement age by a year in an independent Scotland. Last week SNP Deputy First Minister Nicola Sturgeon pointed out that Scotland has a lower average life expectancy than the rest of the UK.
However, last night Whitehall sources were insisting the measures were essential for securing the UK’s long-term recovery and balancing the books. A UK government source said: “This is part of the government’s long-term plan to secure a responsible recovery. It is a difficult decision to make sure there is a fair deal across future generations and that the country can live within its means. It will help make sure the country can offer people decent pensions in their old age, in a way the country can afford.”
The Autumn Statement will also see populist measures to scrap paper car tax discs, saving £7m in administration costs, and promises to freeze business rates for firms employing people under the age of 21. Green subsidies are also being switched from onshore wind turbines to those built at sea after pressure from Tory MPs.
Mr Osborne will make it cheaper to pay vehicle tax for six months, reducing the extra amount on the 12-month charge to 5 per cent from 10 per cent. Motorists will also be able to pay their car tax by direct debit, where the extra cost for those spreading their payments over a year will only be 5 per cent.
A Treasury source said: “This is a symbol of how we are moving government into the modern age and making dealing with government more hassle free.”
Ahead of today’s Autumn Statement, SNP finance secretary John Swinney has challenged Mr Osborne to “come clean” about Scotland’s finances if it stays in the UK. Quoting a cross-party Westminster report last week, he said there was a danger Scotland could lose £4bn if the Barnett Formula is scrapped.
He said: “The Autumn Statement is a chance for the Chancellor to chart a proper course for a sustained economic recovery – but he also needs to come clean about his future plans for Scotland’s finances.”
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