Why the Labour government could reform the State Pension and what it means for you

Almost half of Brits doubt the State Pension will exist by the time they retire, according to a PensionsAge report published in July 2025. While scrapping the State Pension may not be on the cards yet, there are suggestions that significant changes, which may affect your retirement, could be introduced.

In 2025/26, the full new State Pension is £230.25 a week and can be claimed from age 66. Even though the State Pension may not be enough to cover all your retirement expenses, it often provides a reliable base income. So, changes could affect your long-term financial security.

Spending on the State Pension is estimated to reach 7.7% of GDP by the 2070s

The State Pension is the second-largest item on the government budget after health, and the cost of maintaining it has soared.

According to a July 2025 report from the Office for Budget Responsibility (OBR), spending on the State Pension has increased from 2% of GDP in the mid-20th century to around 5% today, the equivalent of £138 billion. By the early 2070s, the OBR estimates the cost of the State Pension will reach 7.7% of GDP.

Two main reasons are driving the cost of the State Pension, and the solution to them could present challenges when planning your retirement.

1. Shifting demographics could lead to the State Pension Age rising

The number of adults below the State Pension Age compared to those claiming the State Pension has fallen. In the early 1970s, there were around 3.4 adults of working age for every pensioner, which fell to 3.2 in the 2010s. Due to rising life expectancy, the OBR expects the ratio to fall even further to 2.7 by the early 2070s.

As a result, there’s speculation that the Labour government could increase the State Pension Age to reduce the cost. In August 2025, the Independent reported that the State Pension Age could rise as high as 80 over the long term unless major changes are made.

2. High inflation could lead to the triple lock being reviewed

The triple lock was introduced in 2010 and commits to the State Pension rising by the highest of three measures – the increase in average earnings, inflation as measured by the Consumer Prices Index, or 2.5% – each year.

This annual rise may be important for pensioners as it helps to preserve the spending power of their State Pension. However, the triple lock could be reviewed or even scrapped as the OBR report suggests high inflation and volatility have led to it costing around three times more than initial expectations.

A robust financial plan could help you overcome potential State Pension changes

It’s important to note that the Labour government hasn’t announced any changes to the State Pension yet. However, the speculation highlights why a robust retirement plan is essential.

By taking other steps to secure your retirement, you could continue to work towards your later-life goals and be confident about your long-term financial security, even if the State Pension Age or triple lock are reviewed.

Your financial planner could help you assess your options if you’re concerned about the potential changes.

You may find that you’re already in a position to mitigate the potential effects of State Pension changes, which could ease your mind. Alternatively, you might discover a possible gap in your finances. The good news is that by identifying the gap now, you could make changes to bridge it, such as increasing your pension contributions, delaying your retirement date, or reducing your expected retirement income.

Changes to the State Pension are likely to happen over the medium or long term. In the past, when the State Pension Age increased, it was over a period of several years.

So, the potential changes may not affect you, but they could significantly affect the long-term financial security of younger generations.

Speaking to your children and grandchildren about the importance of saving for their retirement could lead to them engaging with their long-term plan and potentially mean they’re more comfortable later in life.

You might also want to offer financial support to secure their retirement, such as making contributions to their pension now or leaving them an inheritance, which we could work with you to make part of your financial or estate plan.

Get in touch to talk about your retirement plan

Regular reviews with your financial planner could help ensure your long-term plans continue to reflect government changes, including those relating to the State Pension. If you have questions about your retirement or would like to update your plan, please contact us.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The Financial Conduct Authority does not regulate estate planning.