Here at The Motley Fool, we’re well aware that the State Pension is a source of frustration for many people. Not only is the payout low at just £168.60 per week, but the State Pension age is slowly rising – it will lift to 67 by 2028 and then to 68 by 2046 for both men and women, up from 65 last year.
However, to make things worse, and to add considerable uncertainty for those who are not set to retire in the next few years, a report released over the weekend from the think tank Centre for Social Justice (CSJ) proposed that the State Pension age should be increased even further, to 70 by 2028 and 75 by 2035. If implemented, this would impact a considerable number of people. Should you be worried?
Rising State Pension age
The CSJ, which was co-founded by former Conservative leader and work and pensions secretary Iain Duncan-Smith, believes that by raising the qualifying age to 75, it would not only help boost the UK economy, but also help improve the health and wellbeing of the older generation.
Its report states: “While this might seem contrary to a long-standing compassionate attitude to an older generation that have paid their way in the world and deserve to be looked after, we do not believe it should be. Working longer has the potential to improve health and wellbeing, increase retirement savings and ensure the full functioning of public services for all.”
The report points out that that the annual pensions bill has skyrocketed from £17bn in 1989 to £92bn today and now makes up £4 of every £10 spent on welfare. Additionally, it states that by 2023 the State Pension will cost the government £20bn more per year as the population ages.
Could it happen?
While I can understand the argument that lifting the State Pension age could potentially help boost the UK economy, personally, I don’t envisage the age being increased to 75 any time soon. It’s simply not practical. Can you imagine the job implications for older people (and younger workers trying to get a job too)? Can you imagine a construction worker or labourer working until that age?
That said, the State Pension age is set to hit 67 within a decade, and I wouldn’t be surprised if it’s increased further at some stage in the near future due to the fact that it is costing the government a colossal amount of money every year.
Plan ahead and take control
What this means is that there’s never been a more important time to plan ahead and think about funding your retirement yourself so that you’re not forced to rely on the State Pension. This could involve:
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Checking the status of your workplace pensions to determine how much money you have saved for retirement and thinking about contributing more.
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Consolidating pension accounts (if you have multiple accounts) for greater control and transparency.
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Opening a Self-Invested Personal Pension (SIPP) and taking advantage of the generous tax relief that is on offer.
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Opening a Stocks and Shares ISA to protect your savings from the taxman.
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Investing in inflation-beating growth assets such as shares and funds to boost your retirement savings.
No matter how old you are now, retirement planning should be a priority. The sooner you start, the more prepared you’ll be for any future State Pension shocks.
