Call to up state pension age faster to beat deficit

The government should increase the state pension age at a greater rate to help boost the economy, a think tanks says.

The National Institute of Economic and Social Research (NIESR) says the government could help tackle ‘lacklustre' projected growth for 2011, currently at just 1.5%, by increasing the state pension age (SPA) to 68 by 2020.

In October's spending review, George Osborne announced the SPA would increase to 66 by 2020, instead of 2026 as planned by Labour.

However, the think tank says the SPA could rise much faster: "In the longer term the government should set itself a more ambitious target of running sustained surpluses to prepare for the cost of population ageing.

"As an alternative to swift consolidation, it could raise the state pension age faster so that it reaches 68 rather than 66 by 2020."

The government's plan to raise the SPA at a greater rate than the previous administration has already come under fire.

According to government estimates, around 30,000 women born between 6 March and 5 April 1954 were able to start drawing their state pension at 64, but will now have to wait until they are 66.

This leaves many women close to retirement without time to save enough money to cover those extra two years, Rachel Reeves, shadow pensions minister warns.