State pension ‘dance’ continues as Britons in their 40s left ‘in the dark’ | Personal Finance | Finance
A new report has concluded current state pension age rules will remain in place, putting fears of an accelerated rise on ice. Mel Stride, work and pensions secretary, confirmed the decision, stating the Government is “committed to providing dignity and security in retirement, and delivering certainty people need to plan for later life.”
However, he plans for a further review to be taken within two years of the next Parliament, to consider the rise to age 68 once more.
Consequently, one expert has expressed concern about a lack of certainty regarding the state pension age.
Alice Guy, head of pensions and savings at interactive investor, said: “The decision is a reprieve for private pension savers, many of whom were worried about needed to make their private pension pot stretch further for longer.
“But while the decision appears to provide clarity, the future is far from certain and ‘will they, won’t they’ dance on the state pension age is due to continue.
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“The can has simply been kicked down the road leaving millions of workers in the dark about their exact state pension age.”
With the report concluding the state pension age change to 68 should be brought in three years earlier, there will be impacts for millions of people.
Those who should pay particular attention are individuals currently aged 45 to 49.
They will be kept in suspense until a decision is made in two years after the next Parliament, which Ms Guy suggested is concerning.
She continued: “It’s important to have certainty when you’re planning for retirement as it takes years to save enough for a comfortable retirement – people need to know what goal posts to aim for.
“As a society we need to take care of our older workers and giving them certainty will help them achieve a dignified and planned retirement.
“It’s also important to remember that many workers simply aren’t well enough or don’t have the energy to work into their late 60s.
“Many people work in physical jobs and need to be able to work outdoors in all weathers. Other in their 60s, disproportionately women, take time out from the workplace to care for loved ones and have to survive on a minimal income.”
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Baroness Neville-Rolfe floated the concept of a six percent cap on Gross Domestic Product (GDP) on the total spent on pensions.
However, it isn’t all bad news as working Britons could stand to benefit from the situation.
Calculations from interactive investor show middle aged workers could see their retirement income swell by £17,000 as a result of the temporary freeze.
The decision also benefits private pension savers due to the rules on pension access.
The normal minimum pension age (NMPA) – the point at which a private pension can be accessed – is linked to the state pension age.
The NMPA will be 10 years earlier than the state pension age from 2028 onwards, meaning any rise in state pension age would mean private pension savers needing to wait longer before accessing their private pension.
A later state pension age also means drawing on one’s private pension for less time.
Losing one year of state pension could mean a person’s private pension runs out two years earlier, according to interactive investor calculations.
