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EnergyRising state pension age: you may never retire
Filed under: Pensions
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Stefan Rousseau/PA Wire/Press Association Images
So what can we expect, and why?
Retirement Tips & Tools
Current timetable
Some rises are already in the diary. Between now and 2018 the state pension age for women will continue to rise until it gets to the age of 65. At that point, the pension age for men and women will rise together. Between 2018 and 2020 it will go up to 66. Then between 2026 and 2028 it will rise to 67, and between 2044 and 2046 it will rise to 68.Retirement Tips & Tools
However, the final rise is something put in place by the Labour government, and the current government has not confirmed that it will stick with this timetable. In fact, in March, during his Budget announcement, George Osborne said that the long-term plan was to link future state pension age increases to longevity.
Accelerated
Tom McPhail, Head of Pensions Research at Hargreaves Lansdown, says the industry is now expecting the final stage (the rise to 68) to be superseded by this link to longevity, which will see retirement ages reaching 68 far sooner - and then going on to 70 and beyond.If you look at the rate of increase in longevity, the speed is far faster than the timetable so far. The length of time the average person would spend in retirement has increased from around 16 years in 1981 to around 22 today, and that rate of change is not expected to slow.
If you cast forward to 2041, when today's 30-somethings will be retiring, the average retiree is expected to live until roughly 92. That would mean the state pension age could be somewhere between 70 and 76. It would mean that by the time today's children are retiring, a state pension age of 80 wouldn't be out of the question.
The old timetable would have 30-somethings retiring at 68, so there is plenty of wiggle room for Osborne to save some more cash.
Cash
According to McPhail, cash has always been the driving force behind this move. Raising the state pension age saves the government a lot of money. It saves around £3.5 billion a year in reduced pension payments as a result of raising the state pension age by one year. Total government savings, taking account of reduced pension liabilities, and increased direct and indirect tax revenues amount to £13 billion a year.If you work on the basis that roughly 700,000 people retire every year, that works out as each individual losing £5,000 a year in pension income - and because they continue to work, a total per person transfer of wealth to the government of £18,500.
Plan
There is little we can do about this except plan for it. McPhail, explains: "There are basically only two things you might want to do: either work later so you have continued income to cover the missing years of state pension, or make sure you have saved enough to be able to retire when you want and use your savings until your state pension kicks in. The only other outcome is the one you want to avoid: ending up in your mid to late 60s with no earnings, no pension and not enough savings."10 of the biggest consumer rip-offs
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