Future retirees could face a "double whammy" if the state pension age (SPA) increases whilst tax incentives are cut, The Investing and Saving Alliance (TISA) has said, as industry experts stress that life expectancy "not the only factor” to consider when setting the SPA.

The government's third review of the SPA was launched earlier this year, with a focus on the factors it should consider relating to state pension age and the proportion of adult life currently spent in retirement.

As part of this, the government held a call for evidence to support the work of independent reviewer, Dr Suzy Morrissey, who was tasked with preparing recommendations for a framework that would allow the Secretary of State to consider future state pension age arrangements in the light of the long-term demographic pressures the country faces.

In its response to the call for evidence, however, TISA urged policymakers to take a holistic view of retirement income policy, stressing that while life expectancy is a key consideration, it must not be the sole driver of policy.

Instead, the group said that there needs to be a more nuanced approach to linking SPA to life expectancy, warning that current projections are outdated and that any automatic adjustment mechanisms must be carefully designed to account for unprecedented events and avoid unintended consequences.

The group also emphasised the need for proper consideration of intergenerational fairness, including the impact on current workers who will be required to support a growing number of retirees living longer whilst potentially needing to wait longer to access state pension benefits themselves.

TISA head of retirement, Renny Biggins, said: "Raising the SPA while simultaneously scaling back tax incentives for private pension saving risks creating a double whammy for future retirees.

“The state pension is a cornerstone of retirement income for millions, and we welcome the government’s intention to ensure its long-term sustainability. But any changes must be part of a joined-up strategy that considers private pensions, health inequalities, and the broader economic landscape."

Aegon took a similar stance in its response to the review, arguing that life expectancy is “one but not the only factor” when setting SPA.

In its response, Aegon argued that retaining the triple lock in future will require increases to SPA, but warned that waiting longer for the state pension is harsher on lower-paid and those with lower life expectancies

"When life expectancy is improving, there’s always pressure to increase the SPA. But the other key factor is the yearly amount, which is currently increased each year in line with the triple lock. Life expectancy is one, but not the only factor, to take into account," Aegon pensions director, Steven Cameron, said.

“An increase in life expectancy across the population can hide many disparities between groups based on individuals’ health... Those with the lowest life expectancies suffer most from an increase in SPA - having to wait an extra year is a bigger loss if you have say 5 years to live, compared to someone with 30 years ahead."

Given these concerns, both Aegon and TISA emphasised the need for warning before any changes are made, recommending the inclusion of a minimum 12-year lead time for any changes made to the SPA, to allow individuals and households to plan effectively.

"Without sufficient time and support to plan, many individuals — particularly those in lower-income households or with shorter life expectancies — could find themselves financially exposed, unable to bridge the growing gap between retirement and access to the state pension," Biggins stated.

"This approach risks undermining the adequacy and fairness of retirement outcomes across generations."

In addition to this, TISA called for early access options that would benefit groups with reduced life expectancy, and stronger auto-enrolment measures to bolster pension adequacy more widely.

"We also believe that if the SPA increases further, people should be given the option to take it a little early, subject to a reduction in yearly amount to make it financially fair," Cameron agreed.

Aegon also echoed TISA's caution around the idea of introducing ‘automatic adjustment mechanisms’ used in other countries

Whilst Cameron acknowledged that this would take decisions away from politicians, he clarified that, "in the UK, this needs to be treated with caution".

"The triple lock automatically adjusts the state pension amount, so a further mechanism that automatically adjusted the SPA would leave future governments with very little means of controlling future costs," he explained.

“The age at which you can draw your state pension has a huge impact on individual retirement plans, even for those with substantial private or workplace pensions."

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