Inquiry concerning the state pension age and its respective claim date.
Let's Dive into the Changing Landscape of Retirement Age in the UK
Are you bracing yourself for a late-60s retirement? Well, it's time to rethink! The UK's retirement age, once sitting comfortably at 65, is on an upward trajectory. As of now, it's 66, and it's slated to rise to 67 between 2026 and 2028, and further to 68 between 2044 and 2046. Hold onto your hats, as there might be more changes on the horizon.
But don't fret! Retiring at 65 isn't entirely off the table. Our comprehensive pensions guide explains that the state pension is merely a safety net, meant to support a modest retirement lifestyle. Most retirees have a private pension - like a workplace pension or a SIPP - to boost their earnings. Under current rules, you can access your private pension at age 55, although it's set to go up to 57 from April 2028.
The state pension still plays a pivotal role in most saver's retirement plans, with 24% of savers relying on it as their only source of income post-retirement, according to research from SunLife. So, let's delve deeper into when you can expect to reap your state pension, and what a growing state pension age means for savers and the UK economy.
So, When Can You Count on Your State Pension?
While the state pension age is currently 66, it's set to increase a couple of times over the next 20 years. By 2026-2028, it'll climb to 67, and again to 68 by 2044-2046. But the story doesn't end there. An aging population could put a strain on the taxpayer, with figures from the Office for National Statistics projecting a 14% increase in the number of people at state pension age by 2032.
This surge in pensioners puts pressure on public finances to fund state pensions and provide care in older age, as pointed out by Rachel Vahey, head of public policy at investment platform AJ Bell. The dwindling birth rate further complicates matters, with the ratio of working people to pensioners looking fragile. A report from the International Longevity Centre even argued that the state pension age may need to rise to 71 by 2050 to ensure the workforce is sufficient to fund the retirement benefit.
The London School of Economics, meanwhile, suggested the state pension age should be increased to 68 "as soon as possible" instead of waiting until 2044-2046.
Eager to know when you'll get your state pension? A quick and simple tool on the government website can help you figure it out. But keep in mind that the result you get today might change if the government introduces new legislation.
Why the State Pension Age is Climbing
The basic state pension was introduced in 1948, with retirement age set at 60 for women and 65 for men. Post-WWII, most pensioners only lived a few years after reaching state pension age. However, improvements in living standards have extended life expectancies, with some people now spending up to a third of their life in retirement.
In a 2023 review, the Department for Work and Pensions revealed that men born in 1951 were expected to live to 76, while women to 81. Whereas men born in 2020 are projected to live to 87, and women to 90. This stretch in life expectancies makes the state pension increasingly expensive for the government to fund. Estimates from the Office for Budget Responsibility suggest the state pension cost around £125 billion last year (2023/24 tax year).
The tripled lock, which increases the state pension annually in line with inflation, wage growth, or 2.5% - whichever is highest - has also driven up costs, protecting pensioners against rising living costs but burdening the taxpayer. In 2025, those who qualify for the full new state pension will see their annual total increase by £470.
So, while it's not a shocker that the state pension age is rising, continuously pushing back retirement for thousands of savers isn't a one-size-fits-all solution. The Waspi women's experience is a clear exemplification of the problems that can stem from changing the system.
The Risks Associated with a Rising State Pension Age
As the state pension age climbs, savers may struggle to remain in the workforce for longer, due to health issues, physically or mentally demanding jobs, or caregiving responsibilities. The higher the state pension age, the more people might struggle to stay employed. This could become increasingly divisive and out of step with today's flexible private pension scene.
Older employees often play a crucial role in the economy as providers of free childcare, saving families an estimated £90 billion in childcare costs. If the state pension age were to rise further or more quickly, grandparents would no longer be able to provide this valuable assistance.
Lastly, changes to the state pension age will force households to rely on their private pension savings for extended periods if they decide to leave the workforce before retirement age. This comes at a time when many savers are already grappling with a pension shortfall due to rising living costs. A quarter of adults never expect to retire, while others are forced to re-enter retirement for fear of running out of money before they pass away.
Managing your personal-finance becomes increasingly crucial as the state pension age rises, and you might need to rely on your savings and private pensions for a longer period. With the state pension age set to increase to 67 by 2026-2028, and further to 68 by 2044-2046, it's essential to review your pension plans and savings strategy to ensure a comfortable retirement.
