What are the changes to the State Pension age?

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 Please Note: Information in this blog was current at the time of publishing, but may no longer be up-to-date with current legislation. Please visit our blog for the latest pension articles.


With the raft of changes that George Osborne announced in his March Budget, pension freedoms dominated the news. Receiving less attention was the stated age increase at which private pensions can be accessed, from 55 to 57 in 2028 and then rising in line with the State Pension age.

The State Pension age will rise from the traditional 60 for women and 65 for men to 66 for both in 2020. Women will see the largest initial jump, matching men at 65 in 2018, and future rises will apply to men and women equally. Between 2026 and 2028 it is expected to be 67, reaching 68 in the mid-2030s and eventually being linked to life expectancy, which could push it into the 70s.

These reforms may not be very popular with the people that will spend more years in work, but the existing ages were set a long time ago and have never been adjusted with our rising life expectancy, meaning more people are having longer retirements. The State Pension was first introduced in the UK in 1908; called the Old Age Pension it provided an income to people from the age of 70, when they were expected to live for around another nine years.

The law changed in 1925, when a pension was paid out at 65. The higher rate paid to a married couple only applied when both people were 65, which meant men with younger wives had to wait to receive the extra money.

In 1940, the ages were adjusted so that men could still receive their State Pension at 65, but women could receive it at 60. This was to try and ensure that the higher rate for married couples came into effect once the husband turned 65, with no delay waiting for the wife to reach the same ago.

The State Pension age that we still adhere to was set 64 years ago, so it can be argued that a review was needed. Our increase in life expectancy has put a lot of pressure on the public purse, with the State Pension covering people not for nine years as in 1908, but often for 20 or 30 years. The review also needed to consider that people are generally capable for longer than in the past - although critics will argue that working behind a desk until 68 is not the same as manual labour, which they may not be physically able to do.

Despite the valid reasons for feeling the need to increase the State Pension age, there's a risk that it may damage the positive news around pensions this year, including auto-enrolment and the pension freedoms. This is because younger people in particular may feel that the age will keep increasing to the point they will never be able to stop working.

This outlook will not have been helped by the news that the Isle of Man is considering increasing State Pension age to 74 for anyone born after 2011, along with National Insurance contributions of 45 years. The Isle of Man's demographics are different to the rest of the UK, but what may concern people is the life expectancy for men is 79.33 years, and 82.75 for women - so increasing the State Pension age to 74 could see retirement last less than a decade.

Ideally, though, the increases should encourage further saving, in a diverse portfolio that includes pensions as well as other savings vehicles. The current age to access a private pension is 55, increasing to 57 in 2028 and eventually remaining 10 years below State Pension age. By saving hard, there will be less dependency on the State Pension and the money in a private pension will remain accessible far earlier, so it will be possible to have an early retirement if saving for it is a priority.

If you are unsure how the changes affect you, the government has a State Pension calculator to work out when you will be eligible.

What do you think about the proposed increases to the State Pension age? Let us know with a comment below.

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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new

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