Increase in State Pension age will affect your retirement plans

The rise in the State Pension age to 68 will now be brought into effect between 2037 and 2039 instead of 2044 – up to seven years before it was previously earmarked to increase.

The move announced on 19 July by the Secretary of State for Work and Pensions, David Gauke, is expected to save the Treasury up to £74bn by 2045/6, but it has been met by criticism by the opposition and comes at a time when life expectancy predictions are levelling off in the UK.

Phil Jenkins, a Chartered Financial Planner at Wren Sterling said: “If you’ve factored the state pension into your financial planning, this announcement will be a blow. The new full State Pension is currently worth £159.55 per week, so if you were born between 6 April 1970 and 5 April 1978 and budgeting to retire at 67 with the State Pension as part of your retirement planning, you’ll need to review your plans.”

The thin end of the wedge?

A report by the government’s actuary department in March suggested that workers now under the age of 30 may have to wait until 70 before they qualify for a state pension.

Jenkins added: “It’s clear that affordability is at the heart of the government’s decision, so it’s reasonable to assume that this won’t be the last change to the State Pension age, particularly for younger workers who are likely to need to contribute more themselves to their retirement.”