State Pension age increase: Raising retirement age could be good thing | Personal Finance | Finance
The current state pension age is 66, and two further increases are in the pipeline. A gradual increase to 67 is coming for those born on or after April 1960, and a gradual rise to 68 between 2044 and 2046 for those born in or after April 1977.
But as part of the review, the latter change could be brought forward to between 2037 and 2039, meaning those born on or after April 1977 will have to wait until 68 to get their state pension payments.
The results of the review will be published by May 7 this year.
A spokesman for the Department for Work and Pensions said: “The review will consider whether the rules around state pension age are appropriate, based on a wide range of evidence including latest life expectancy data.”
The news has rattled many with plans to retire in their mid 60s, as bringing forward the timetable will leave millions waiting longer for retirement, particularly if they are dependent on the payments for essentials.
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Becky O’Connor, the head of pensions and savings at the website interactive investor, said: “The idea of a long, enjoyable retirement seems set to be consigned to the history books.
For those who find they can no longer work before they reach 68 because of age-related ill health, the inability to claim state pension presents huge issues.
“The age at which people can expect to start to experience health problems that might prevent them working is around 63, which could leave many people facing several years where they either have to rely on private pension provision, which may be inadequate anyway, or other benefits.”
But some experts argued a rise in the State Pension age is a good thing – and could inspire workers to focus more on boosting their private pension.
Tim Leonard, a personal finance expert at leading financial comparison website NerdWallet, agrees that while raising the state pension age will be unpopular with the public, the cost to the Treasury will rise.
Mr Leonard said: “Increasing the state pension has long been a highly contentious issue and it is easy to have sympathy with both the Government who are implementing the change and those of us who will ultimately be affected by it.
“On the Government’s part, the cost to the Treasury of funding the state pension is already around £105bn a year and, with an ageing population, will only head higher.
“With pandemic-related financial pressures biting hard too, policymakers feel the purse strings must be tightened somewhere, and delaying paying the state pension until later in life would definitely help.
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“But, on the other hand, people who have planned for their retirement and have a date they are working towards to give up work understandably feel the goalposts are being moved, and certainly not in their favour.
“Differences in life expectancy rates around the country inevitably mean some people will feel a greater impact for having to work longer than others.
“Ultimately, if people want the best chance of meeting their retirement dreams, the key is to take personal responsibility for your pension planning and make sure you’re regularly paying into your own pension each month.”
George Mattar, Executive Director, Financial Planner at Coutts, told Express.co.uk that longer life spans are applying pressure to the Government to make changes.
Mr Mattar said: “Due to improved health we could remain productive in society for longer. State pensions are pay-as-you-go arrangements and future generations, as the pension age stands, will need to support an increasing number of pensioners for longer.
“This implies increasing tax rates and declining income for the non-pensioners.
“A big issue here is the lack of private pension funding and this is due to a lack of awareness and education around the importance of building your own pot.
“A raise in the state pension age could help to show the importance of a private pension and the importance of staring this pot as early as possible, driving change for future generations of retirees.”
