The best way of protecting people with shorter life expectancies is to give them a minimum guaranteed payout on their State Pension, says pensions consultancy LCP.

It has proposed that anyone who starts getting a State Pension should be guaranteed a minimum five years’ pension payout.

The change would ensure that everyone gets, “something for something” from the system, according to the firm.

At the same time LCP has suggested that the State Pension age be set so that people can expect to get a pension for 20 years on average.

Under the policy, future increases in life expectancy would feed through 100% into the size of the working age population, making the system more sustainable, the consultancy said.

The “guaranteed period” of five years, would ensure for the first time that everyone who reaches State Pension age would get something back for their contributions, providing protection to those with lower life expectancy, as State Pension age increases.

The changes would ensure that the state pension system remains affordable against a backdrop of what is expected to be continuing increases in life expectancy and do so in a way that mitigates the impact on people who live in places like Blackpool and Glasgow who could potentially be most adversely affected, LCP said.

Steve Webb, partner at LCP and former Pensions Minister, said: “The case for increasing State Pension ages is strong, but it has always been hard to do so in a way that is fair to people in more deprived areas who cannot expect to draw a pension for as long.

“Our proposal means those who have paid into the system all of their lives would be guaranteed that they or their heirs would get a minimum payout once they start drawing a pension. This would be a concrete way of addressing concerns over unfairness each time State Pension ages are increased.”

Stuart McDonald, partner at LCP and longevity specialist, said: “Life expectancy in the UK for young adults rose by 17 years during the 20th Century, but State Pension age did not increase at all. As a result, we now have historically long retirements which will inevitably prove fiscally unsustainable.”

He said a new approach is needed. The firm advocates a progressive increase in state pension ages, increasing by one year every 10 years for the foreseeable future, to get things back into balance, while giving people fair notice. LCP said the system should target a set number of years – such as 20 years – as the expected length of time receiving a state pension, and that should not increase as life expectancy increases.

Mr McDonald said: “We recommend setting pension ages on the basis that the average person can expect a fixed number of years in retirement. This will help the system to catch up with the dramatic improvements in life expectancies which we have seen, and will be fairer to current and future people of working age, whose contributions are used to pay the pensions of retirees.”