Changes to the State Pension age are critical to ensure that the State Pension remains sustainable and affordable in the future. Currently, the State Pension age for both men and women is 66. It’s planned to rise to 67 by 2028 and 68 between 2044 and 2046. However, a State Pension age review conducted in 2017 recommended that the next review consider whether the planned age increase to 68 should be brought forward to 2037–39.
A new review on the State Pension age has now been officially launched by the government. The question many have now is whether this review will recommend hastening the increase in State Pension age. According to Hargreaves Lansdown, the new review could actually quash any plans to hasten the rise in State Pension age. Here’s the lowdown.
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Could a government review prevent an early increase in State Pension age?
According to Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, the new State Pension age review comes at an interesting time, especially with the increase in life expectancy slowing down and the long-term impacts of Covid-19 yet to be established.
She suggests that an analysis of recent life expectancy data as part of this review could put a stop to the option of accelerating the State Pension age increase to 68 from 2044-2046 to 2037-39.
She goes on to say that the review will also most likely consider other factors “that feed into the debate on State Pension Age”. These factors include differences in life expectancy by region.
Furthermore, she believes that the review will spark a discussion about healthy life expectancy, or ability to continue working and how it varies across the country.
Could there be an alternative outcome?
There is a lot that could happen in this second State Pension age review. One possible outcome, as suggested by Morrissey is the quashing of any plans to raise the State Pension age sooner. Unfortunately, we won’t know the review’s findings or recommendations until May 2023.
Of course, with the Covid-19 pandemic and the measures put in place to combat it taking a heavy toll on government coffers, there is still a chance that the review could recommend hastening the increase in State Pension age.
This could be bad news for those born from the early 1970s onwards. So, if you are in this group, what exactly could this mean for your retirement? Well, to begin with, you could be left with a significant financial shortfall. This is especially true if the State Pension is a big part of your retirement plan. Alternatively, you could be forced to work longer than you want.
But don’t panic just yet.
What action can you take?
While the minimum State Pension age is beyond your control, the good news is that there are steps you can take to ensure that any changes to the State Pension age do not leave you in a financial hole or jeopardise your financial wellbeing in retirement.
One great move is to sign up to a workplace or a personal pension if you haven’t already.
Unlike the State Pension, most workplace or personal pension plans will allow you to start drawing from them as early as the age of 55. You can then use this money to support yourself until you hit the State Pension age.