Will you be one of the millions of workers who will have to work an extra year before retiring after the government announced that it would be extending the retirement age to 68? If so, you might need to rethink your plans for retirement. George Square Financial Management explains…
New plans were announced in July which states that the new state pension age will rise to 68 in 2039, affecting people born between 6 April 1970 and 5 April 1978.
The rise in the pension age will be phased in between 2037 and 2039, rather than from 2044 as was originally proposed. Those affected are currently between the ages of 39 and 47, but the exact date that you receive your State Pension will depend on the year you were born. Anyone younger than 39 will have to wait for future announcements to learn what their precise pension age will be. The rise in the state pension age is aimed at catching up with years of increasing life expectancy.
Six million men and women will have to wait a year longer than they expected to get their State Pension.
The announcement is based on the recommendations of the Cridland report which also said that the state pension age should not increase more than one year in any ten-year period, assuming that there are no exceptional changes to the data used. This would give those generations affected by the changes adequate time to save and plan.
On making the announcement David Gauke, Secretary of State for Work and Pensions, told MPs:
“As life expectancy continues to rise and the number of people in receipt of State Pension increases, we need to ensure that we have a fair and sustainable system that is reflective of modern life and protected for future generations.”
Save harder for your own retirement
The government has also committed to regular reviews of the state pension age in the years ahead, which inevitably raises the prospect of further rises. It seems evident that the government is taking a gradually declining role in supporting retirement income.
A combination of increases in life expectancy, and the growing number of retirees relative to the working age population, means that individuals will now have to save harder for their own retirement.
Time to review your retirement plans
If you are affected by the new state pension age or are concerned about your retirement plans, you should seek professional financial advice to ensure your plans will still meet your objectives in retirement.