The International Monetary Fund (IMF) has warned that the UK’s state pension age (SPA) might have to increase further in order to keep pace with the costs of an ageing population. In March 2017 former Director-General of the Confederation of British Industry (CBI), John Cridland, delivered a government-backed review of the state pension age. He recommended raising the state pension age to 68 between 2037 and 2039. After that, he recommended allowing it to increase in line with longevity expectations, but by no more than one year every decade.
That would mean the state pension age could reach 70 by as early as 2057 - affecting anyone born after 1987.
Increases to the current SPA are already in progress. More than 25 years ago, under John Major’s government, a move was made in order to equalise the male and female ages, and over the years, this has gradually been phased in. Women’s state pension age became equal to men’s for the first time in November 2018 at age 65, and both sexes will see a further increase to 66 from December 2018, then to 67 from 2028.*
The IMF’s figures show that lengthening life expectancy - plus growth in the percentage of Gross Domestic Product (GDP) required to pay for higher health care and pension benefit costs – would seem to confirm that the SPA needs to rise even further.
Its report also suggests that the government may need to review its commitment to the ‘triple lock’- which means the state pension always increases annually by whichever is the lowest of inflation, average wage growth or 2.5%.
While the state pension will continue to be an important part of everyone’s retirement planning for the foreseeable future, the age at which we receive it and the level of benefit it delivers is less certain. Making sure that you have your own pension savings puts you in charge of your own retirement and gives you a safety net, should changes to the state allowance happen sooner rather than later.
If you need more information or wish to discuss your personal retirement planning strategy, please talk to a Brunsdon Financial Adviser.
Please note that this article is for information only and does not constitute specific advice. The information is based on our understanding of Government plans to increase the SPA and these plans may be subject to change. Brunsdon is not responsible for the content of third party web sites.