Steve Webb, the former Liberal Democrat MP who served in the coalition government, said the policy revealed in the leaked Labour manifesto would have an “astronomical” cost.
Webb, now director of policy at insurance firm Royal London, said: “These are eye-watering sums of money which would either have to be found from somewhere or added to the national debt.”
He said as people live longer it is “inevitable” that state pension ages will have to rise, adding: “It is unrealistic to suppose that as a nation we can afford to ignore the fact that we are all living longer."
Financial services company Hargreaves Lansdown joined the debate saying if Labour wanted its state pension age plan to be cost neutral, it would have to cut individual state pensions by £800 a year.
Tom McPhail, head of policy at Hargreaves Lansdown, said: “You have to put [Webb’s analysis] in context: the state pension costs around £100bn a year and these projections roll out over the next 30 years, so this analysis involves a total cost in today’s money of around £3 trillion.
“In other words these Labour proposals would increase the state pension costs by around 10%. If you want to freeze the state pension age at 66 and keep the changes cost neutral, you’d have to cut the state pension for every individual from £8,000 a year to around £7,200.”
Under Labour proposals included in the leaked manifesto the current rise from 66 to 67 due between 2026 and 2028 will not happen and neither would the rise from 67 to 68 due between 2044 and 2046.
Stopping planned rises for those reaching pension age between 2028 and 2046, who would receive the state pension at 66 instead of 67, would affect around 650,000 people a year over an 18-year period and 11.7 million people in total.
Webb’s calculations assumed a flat rate pension of £8,000 per year - in today's money, that would cost £93.6bn.
The second change could affect everyone who reaches pension age after 2046. Webb said this would impact 650,000 people per year over a 20-year period, or roughly 13 million people.
Each person would gain two years' worth of state pension or £16,000 each – a total of £208bn.
The total cost of the proposed policy is just over £300bn – or nearly a third of a trillion pounds.
Webb said this doesn't take into account the economic damage caused by people retiring earlier than they would have done under the current schedule.
The final version of Labour’s manifesto has been agreed and will be released to the public next week.
