Why those born in the 1990s could face a state pension age of 74... here's how to protect yourself

Sticking with raising the state pension according to the popular 'triple lock' while keeping the bill affordable could be bad news for people in their 30s and younger.

A high profile think tank report last week included a reminder about government modelling on how to limit public spending on the state pension to below 6 per cent of national income,

To achieve this AND retain the triple lock guarantee - by which payments are increased by at least 2.5 per cent a year - the state pension age would have to rise to 69 by 2048–49, and then jump to 74 by 2068–69.

The new pension review from the Institute for Fiscal Studies called on the Government to promise to never means-test the state pension.

It's view is that the state pension age should only rise as longevity at older ages rises, but by less than that - meaning the average time spent receiving the state pension would increase.

So how likely are drastic state pension age rises, and how do you protect your savings and get them on the path to a comfortable retirement.

The state pension is currently almost £12,000 a year if you have paid enough in to receive the full amount.

The qualifying age is 66, and between 2026 and 2028 it will rise to 67 - but the next rise to 68 is still up in the air.

Officially, it is not scheduled until the mid 2040s, which would affect those born on or after April 1977.

The Government is required by law to review the state pension age periodically. However, the last two reports in 2017 and 2023 recommended speeding up the increase to 68 - and then went ignored.

The next review isn't due until spring 2029, but Labour might take as little notice of any findings as the Tories.

Denmark's government recently moved to hike its retirement age to 70 by 2040, reigniting the debate about what might happen here.

Money experts pointed out raising the state pension age was going to carry on being a political hot potato, and future changes would have to be carried out with care.

One noted that raising the state pension age risks hitting those most dependent on it the hardest.

Meanwhile, the minimum pension age for accessing workplace and other private retirement savings is due to rise from 55 to 57 from April 2028.

Governments have in the past tended to keep the state pension and private pension ages roughly 10 years apart, so any future increases could well continue to happen in tandem.

In its influential new pensions report, the Institute for Fiscal Studies said the state pension age should be linked to rises in longevity.

But it suggested that the qualifying age is raised by less than that, so the average time people receive the payments for would go up.

It notes that longevity at older ages during the late 20th century and early 21st century increased dramatically.

It adds: 'Increasing the state pension age is a reasonable way for a government to control the increased public finance pressures arising from rising longevity at older ages.

'Our modelling shows that increasing the state pension age by one year would save the exchequer around £6billion per year.'

But it points out the 'different distributional effect' of using age rises to control the rising cost of the state pension.

'Retaining the triple lock while raising the state pension age would hit poorer people more because the loss of a year of state pension income is more important for those with lower life expectancy (which poorer people tend to have), as they spend fewer years above the state pension age.

'On the other hand, those with a higher life expectancy benefit relatively more from the triple lock, as they are more likely to be receiving a generously indexed state pension in their 90s and beyond.'

The IFS says its stance of only raising the state pension age as longevity at older ages rises leaves room to prioritise increasing, or holding down, the state pension age to different extents.

It is also consistent with keeping the ratio of adult life spent above the state pension age constant, it says.

'The current government should clearly set out a plan for when we will get to a state pension age of 68 – and specifically whether this should be brought forward.

'This is particularly timely and important now, as both independent reviews of the state pension age have sensibly recommended that any changes to the state pension age be communicated to people at least 10 years in advance.

'The government should promptly conduct a new review of the state pension age, using the latest projections of longevity, and make a swift decision on when (not if) these increases should come in.'

Auto enrolment means younger workers are nudged into saving minimum amounts towards retirement, which should generate a fund that combined with the state pension provides an adequate but not luxurious lifestyle.

It's important not to opt out unless you are suffering serious hardship, despite other pressures and priorities like buying a property and starting a family.

This is not just because you are harming your future finances, but delaying or pausing pension contributions while you are young has an outsize impact on your eventual retirement fund.

The stark reality was shown in a recent study by Standard Life, which found putting off starting a pension for five years in your 20s can create a £40,000 hole in your savings - see below.

That is because you miss out on the power of compound growth, which is hugely beneficial if you start young because it has more time to work.

Compound growth means because any investment return stays in your pot, you then make a return on that higher amount, and then a return on that even larger sum, and so on over and again.

You might start with a small contribution to a pension, but making returns on your returns will still have an exponential effect in the longer run.

How much delaying pension saving can cost you

Under auto enrolment, the minimum contribution is 8 per cent of your earnings that fall between £6,240 and £50,270. But this is split three ways, with you putting in 4 per cent, your employer contributing 3 per cent, and the Government adding 1 per cent in tax relief.

If you put in more, many employers will increase their contributions too.

Dean Butler of Standard Life offers the following tips to young people on saving a decent pension.

1. Make sure you're taking advantage of all the benefits of your pension plan and of the support offered by your employer - a higher contribution matching scheme, for example.

2. If you get a bonus, receive overtime pay, get a pay rise or have a little extra savings, think about paying more into your pension.

3. Keep an eye on your investments, and the returns they're giving you. Higher-risk investments potentially see more growth over the long term, but their value might be more volatile.

In your 20s, you might feel happier with some higher-risk investment, as your pension has more time to potentially recover from dips in the market – but this won't be right for everyone.