New graduates will have to work until 71 before qualifying for state pension

Students graduating this summer can expect to wait until they are at least 71 before receiving a state pension – three years longer than under current plans – following a budget decision to link retirement ages to changes in life expectancy.

The move by chancellor George Osborne to create an automatic link between longevity and the pension age means that tens of millions of people under 50 who expected to retire in their middle to late 60s will have their state pensions shunted between one and three years further back.

Analysis by the country's leading experts in longevity and public sector pensions, Club Vita, suggests that a child born today will have to wait until 74 at the earliest for a state pension. Club Vita is a sister company of Hymans Robertson, a key player in advising on reform of all public sector schemes.

"Our analysis suggests that the state pension age will need to rise to 68 and over for those currently aged below 50," said Club Vita's Steven Baxter. "This would accelerate the current plans, bringing forward the rise [to 68] from 2046 to around 2030.

"The government is aware of the need to provide individuals with sufficient time to prepare for these changes – and we would not be surprised to see ministers giving advance warning of these likely changes, possibly as soon as later this year."

In Wednesday's budget Osborne announced that the state pension age will be adjusted automatically "to take into account increases in longevity".

Currently life expectancy is rising by around 2.5 years every decade, meaning ever increasing costs. This rate of increase is expected to continue for the next 10 years before slowing. Ministers argue that the pension system will become unaffordable without reform.

Setting the stage for further conflict with unions, Osborne made clear that the retirement age for public sector workers would also have to climb to reflect future rises in the state pension age.

Pension experts and groups representing the elderly say ministers will need to take into account the number of healthy years somebody is expected to spend in retirement, as well as life expectancy.

"This gap between full and 'healthy' life expectancy has been widening as the number of years spent in ill health at the end of life has increased," said Baxter. "When increasing state pension age, the issue of whether the extra time before state pension age is spent in good health, with people able to work, needs to be considered."

Michelle Mitchell, Age UK's charity director, said: "Age UK recognises that as life expectancy increases it is reasonable to consider increases to the state pension age and longer working lives; however this decision has been based on no published detailed analysis.

"Average life expectancy must not be the only factor that is considered as, at the moment, the huge disparities in healthy life expectancy across the country means that the poorest socio-economic groups will be required to sacrifice proportionately more of their retirement."