More uncertainty for UK pensions regime
22 March 2023
Rumoured delay in UK state pension age to 68 amid gloomier mortality projections adds more uncertainty to pensions regime…by Myron Jobson
Commenting on rumours that the government is planning to delay plans to raise the state pension age to 68 amid falling life expectancy in the UK, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Gloomier mortality projections have forced a rethink on the State Pension age, which means that it could stay lower for longer.
“The decision on the State Pension age is an important one that could have a telling impact on quality of life at retirement. Bringing forward the State Pension age increase to 68 by 2046 to 68 by 2034 could mean a year lost full state pension payment of £13,594 for workers aged 57, rising to £16,902 for workers aged 46. Scrapping the plan to bring the rise in the State Pension age forward essentially offers those approaching age 67 by the end of the decade with up to a year’s worth of State Pension extra.
“While many will be fit and able to continue working and making private provision for their pension until far later than the average healthy life expectancy, those that are not are currently penalised. As such, in deciding the State Pension age, the government should consider the impact on people of different genders, backgrounds and occupations and on those in different parts of the country. It is by no means an easy feat.
“The elephant in the room is whether future governments will be able to maintain the benefits afforded to pensioners today – or some semblance of them at the very least. The success of the pension regime depends on certainty and predictability. If the pensions goalposts are constantly shifting, people won’t have confidence – unless the goalpost shift in their favour as could be the case here. In our Great British Retirement Survey 2022, 18% of our nationally representative sample said retirement means health uncertainty, rising to 25% for the over 65. The older we are, the more the worry about quality of life in retirement, so if true, this news will be good news for many.
“Whatever the outlook for life expectancy and the State Pension, there is no escaping the fact that the onus is increasingly falling on individuals to ensure a comfortable existence at retirement. If you accept the principle that we are likely to spend a third of our adult life in retirement, you can at least get an idea of how much money you’d need for a comfortable retirement. Even a small regular contribution makes a big difference to your retirement and the magic of compound interest is likely the most significant benefit of investing early.”
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