Six million people will have to wait a year longer than they expected to get their State Pension, after the Government announced plans to extend the retirement age to 68.
Those born between 6 April 1970 and 5 April 1978, who are now aged between 39 and 47 years old, will have to wait an extra year to claim their state pension, currently worth over £8,000 per year. The rise will now be phased in between 2037 and 2039, seven years earlier compared to the original proposal which was 2044.
The State Pension Age review reflects increasing life expectancy and follows the Cridland’s report’s recommendations made to the Government.
David Gauke, Work and Pensions Secretary, said implementing these proposals would create ‘fairness across generations and the certainty which people need to plan for old age’. He said failing to act ‘would be irresponsible and place an extremely unfair burden on younger generations’.
The change will be unwelcome for people who were counting on receiving their State Pension earlier. Many of us are now working longer, some in different jobs or on more flexible hours. With nearly all employers now having to offer workplace pensions, there are more options to build up savings and these can be used to help fund the gap between working and State Pension age.
With the UK state pension age continuing to rise, contributing into a workplace pension can help fund this gap quicker. Members saving into a workplace pension, benefit not only from their employers paying contributions, but also from receiving tax relief on the payments from the Government. The quality of the workplace pension and level of support offered by employers is therefore key to help members achieve the lifestyle they want at retirement.
The increases in State Pension Age to 66 and 67 are expected relatively soon, but this new increase to age 68 is still some way off, giving people enough time to revise their savings options in order to be able to still reach their retirement goals.
The change is still under review. The Government will carry out a review and consider the latest life expectancy projections before legislating to bring forward the rise. It has also committed to regular reviews of the State Pension Age in the years ahead.
A report issued in March by the Government Actuary’s Department suggested that employees now under the age of 30 may have to wait until 70 before they qualify for a state pension.
The age at which you can claim the State Pension has been subject to continuous revisions. It will be evened out so that both men and woman will receive it from age 65 by 2018. The pension age will then rise to 66 by 2020 and 67 in 2028 as expected.
Your employees can check their State Pension age and entitlement through the State pension calculator.