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Posted 2 October 2017

The State Pension age increase - What does it mean for me?

Financial journalist Felicity Hannah (@FelicityHannah) has asked those affected by the State Pension age increase what the extra year's delay means for their retirement plans.

  • The pension age change has been brought forward
  • The latest changes affect many people in their 40's
  • Many need to re-think their retirement plans

The time at which the state pension age will increase to 68 has been brought forward by the government.

Instead of affecting those reaching retirement between 2044 and 2046, it will now increase to from 67 to 68 between 2037 and 2039. Everyone born between 6 April 1970 and 5 April 1978 will be impacted by the sped-up hike in qualifying age, having to wait up to a year longer to receive their State Pension.

It’s just the latest in a series of pension age pushbacks that our leaders say reflect our increasing life expectancy. We are living longer: life expectancy at birth has increased by 13.1 weeks per year on average since 1980–1982 for men, and 9.5 weeks per year on average for women. This means we’re claiming our pensions for longer so the state wants to delay the age we can start doing so to cut the bill.

Now, around six million workers in their 40s will have to work for up to an extra year more than they had expected before they can claim old age support from the state.

So how do those affected by the changes feel about it? Does the delay make sense to them? Will it affect their pension saving plans?

How the state pension age increase affects me

‘I don't like the pension changes, as they make it harder for me to retire on my own terms,’ says Ian Volante, a senior assistant statistician living in Edinburgh. ‘However, I understand why it's being done – it's a relatively easy way for the government to save a large chunk of money at some point in the future.’

He thinks that the change is so far ahead in the future that many people will not even realise they are going to be affected, which is why there has been little outcry so far among those hit by the most recent announcement.

‘The lack of immediacy reduces the amount of protest about it,’ he says. ‘It might change my plans, though it’s too long away to say. I've no plans to put any more money into my pensions – I feel a general sense of resignation about it!’

That resignation is mirrored by Richard Jones, a business owner in the south of England.

‘I have been assuming that my state pension will be small to non-existent in all my retirement planning,’ he points out. ‘I'd consider it a nice bonus to get one. I have a number of private pension schemes and other retirement savings options, and have been working to make sure that by themselves they are sufficient for my retirement.’

But some other affected workers are furious.

‘I’m a teacher,’ says Jo, age 45 and living in south London. She was unwilling to give her full name because of the sensitive nature of her job.

‘Teachers work incredibly hard and we already have a shorter life expectancy. And now I have to give up a whole year of my hard-earned retirement. I have to plan for that now; I have to work out what I can afford to do. I’m so sick of the state taking people like me for granted.

‘No, this won’t affect my retirement savings. I am lucky to be in the scheme I’m in, so I have some pension savings – but I’m not exactly earning a fortune, I can’t afford to save more to make it possible to retire when I had planned. It’s completely unfair.’

Live long and prosper

There is actually no statistical evidence that teachers die sooner, although it’s a widely held belief. However, Jo is not the only worker to question whether it is fair to assume all workers will live to a grand old age.

Responding to the announcement at the time, the TUC general secretary Frances O'Grady argued hiking the state pension age risks creating second-class citizens.

‘In large parts of the country, the state pension age will be higher than healthy life expectancy. And low paid workers at risk of insecurity in their working lives will now face greater insecurity in old age too.’

But, not everyone thinks that the current affected generation are that badly off. Rebecca Gidney, age 42, is one. ‘Personally, I think the shift is ok, for me… I have 26 more years to put more in and get more so to speak.

‘My generation won’t be affected at all. We have time to prepare.'

Answering your questions

Jo, Richard and Ian all had questions about their future pensions, so we asked our LV= Pension Specialists for their thoughts.

Jo - Can I delay my state pension and get more?

‘I’m thinking of moving out of teaching and into something less stressful in a few years’ time, but it would mean I’d get less in my private pension. I heard there’s a way to delay receiving my state pension and get more – is that right? Just in case I think I’m healthy enough to do that.’

LV= Pension Specialists said:

‘Teachers’ pensions are very much seen as the best type of pension, and the likelihood is that whatever most people are paying into a personal pension now won’t be as good as an NHS, teacher or government pension.

‘While you’re right in saying that you can delay taking your pension and receive a higher state pension in later years, this may also mean putting back your retirement date, so make sure you consider all your options.’

Richard - Is it likely the state will push the pension age back further?

LV= Pension Specialists said:

‘We’re not qualified to say, but it’s a fair assumption that this could be true since life expectancy is constantly increasing. Also, the state pension age is a very common topical political discussion point, which may also point to another increase being considered.’

Ian - What can I do to protect myself from these changes?

LV= Pension Specialists said:

‘You need to make sure that you’ve planned effectively for your retirement, so ensuring that you’ve read up on the different options available to you could help make your hard-earned savings last longer.

‘It’s also important to make sure you’re reviewing your plans on a regular basis, and seeing if there’s anything you could be doing differently. If it’s the right next step for you, speaking to a financial adviser might help you better prepare.’

There are lots of factors that may affect your retirement like inflation and politics. Although the state pension age won’t affect people until they reach their retirement, this doesn’t mean that those affected should forget about it for now. Any change to your pension should be viewed as an opportunity to review your retirement plans and prepare for the future. Check your state pension age on Gov.uk.

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