Britain’s state pension age must increase further to avoid a debt crisis, the Organisation for Economic Co-operation and Development (OECD) has warned.
Every time life expectancy rises by three years, governments across the world should delay retirements by two years to split the benefit between work and retirement, the OECD said.
In its report on ageing populations, the OECD said that raising pension ages this way could boost the economy enough to raise living standards by 3pc over the coming decades. This would also trim government debt burdens by the equivalent of 1.5 percentage points of GDP.
Britain has already begun increasing the state pension age, equalising the age for men and women, with plans to move from 65 years to 68 by the late 2040s.
However, “average effective retirement ages are not projected to keep up with projected gains in life expectancy anywhere in the OECD,” said the think tank, which covers its 38 member countries, most of which are wealthy.
Life expectancy for men in the UK is set to rise by almost three years over the next 25 years, according to the Office for National Statistics, indicating that the state pension age should rise another two years.
Typically a one-year rise in the pension age delays the average retirement by five months, the OECD found, as workers use their private pensions or savings to leave work before full government support kicks in.
The organisation’s analysts warned that without changes such as encouraging older generations to keep working and increasing the female participation rate, rising costs from healthcare, pensions and debt servicing will amount to 8pc of GDP for the average country.
The UK is in a better position than most with expected fiscal pressures of around 5pc of GDP, or £100bn based on today’s annual GDP.
Funding this could be done via taxes, debt, or reforms to boost growth and keep a lid on costs, the OECD said.