The Government has revisited the question of increasing the state pension age to 67 is a case of flagging it up now to help take the wind out of the sails of the unions, who will be kicking up rowdy again this week over reforms to the public sector pensions.
It is good politics for Government to position public expectations ahead of the event. Similarly, this kite-flying on raising the state pension age to 67 will help to head off problems over the Pensions Bill’s provisions for the rapid increase in women’s state pension age to 66. We may yet see some concession on this latter issue, perhaps by pegging back the Pension Credit to a lower age to ensure that those women who face real financial hardship from the increase in state pension age do receive some help. All this positioning now will serve to make any future concession appear all the more beneficent.
The longevity stats are already out there and keep on relentlessly improving: a two year old girl now has a better chance of reaching 100 than a 97 year old man. We don’t yet know exactly when the state pension age will increase to 67, though a ten year acceleration so that it happens between 2024 and 2026 would be a fair bet. This would affect anyone born after 1958, with the state pension age hitting 67 for anyone born after April 1959. We may well then see the rise to 68 being fed in soon after that. The current consultation on reform of the state pension (including moving to a longevity based formula) will deliver a more permanent solution in due course.
For anyone in their 40s, the answer is to plan on the assumption that their state pension will not be available until age 67. If they want to retire earlier then they will have to save more into their private pension to bridge the gap. Making up an extra £5,312 of state pension to cover the missing year would cost a 47 year old an additional £10 a month. If they wanted to target a lump sum of £7,500, which is roughly where we expect the new universal state pension to end up, then they would need to save around £14 a month.
