Autumn Statement 2013: State pension age rise
Chancellor George Osborne has confirmed that planned increases to the state pension age will be brought forward by a decade.
The state pension was scheduled to increase from 65 to 68 in 2046 but the increase will now be introduced in the mid 2030s. It could then increase to 69 in the 2040s. Workers currently in their 20’s now realistically face the prospect of working until they are 70.
The change should only impact workers in their forties and below and that nobody, currently aged over 50, will have to work beyond 68. Osborne added that young people needed to be sure that they would get a 'proper pension' when they retire.
Going forward the state pension age will also be linked to increases in life expectancy.
Tom McPhail, head of pensions research at Hargreaves Lansdown said: “This was always going to happen, it was just a question of how and when it was unveiled. Currently, the SPA will rise to 67 by 2028 but will then pause before rising to 68 between 2044 and 2046. This was already widely acknowledged as being too late and too slow.”
He added: “Given current low levels of private savings and improvements in life expectancy, it was unrealistic for those in their 40s and younger to expect that they wouldn’t see their State Pension Age rise again above age 67. In reality, many in work today are already unlikely to be able to afford to retire until their 70s, irrespective of when their state pension falls due.”
Pensions campaigner Dr Ros Altman said that the changes provided younger workers with an opportunity: "Rising state pension age should not be considered a penalty on the young. It is an opportunity to embrace the benefits of all the advances in medical and work practices which are enabling most of us to have a longer, fitter working life.
"Later retirement is a realistic response to the great news that people are living longer, healthier lives and that retirement is not all it is cracked up to be. Romantic notions of retirement being a wonderful period of long holidays, lazy days and playing golf are simply not realistic. With just a state pension and a small amount of private savings, retirement is often a question of struggling to make ends meet. "
However Martin Bamford, IFA at Informed Choice said many workers will not be healthy enough to work until they are 70. He said: "Working for longer in retirement is not a solution to a rising state pension age. Often people will find they are unable to keep working, due to poor health or the lack of suitable employment. With rising levels of obesity and chronic health problems, it is delusional to believe you will definitely be able to keep working into your 60s or 70s, as a way of coping financially with a later retirement age."
In the speech Osborne also confirmed that state pension would rise by £2.95 a week from next April and that going forward pensioners would be able to buy voluntary national insurance contributions to top up their incomes.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
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