UK State Pension Age rise to cost Brits £10k each

If you are in your late 30s or early 40s, you are going to have to wait a year longer to receive your State Pension – as the UK Government speeds up by seven years existing plans to reduce State Pension Age (SPA). And “new analysis from the House of Commons library” reported by the Guardian has revealed that each person affected stands to “lose around £9,800.” David Gauke, the Works and Pension Secretary has announced that UK State Pensions will be paid out to those born between 1970 and 1978 upon reaching 68 years of age.

Why was the decision made?

We’re living longer. And that is straining the public purse. The UK Government stands to make a reported £74bn from this reduction in SPA! A March 2017 study by the Director-General of the Confederation of British Insurers (CBI) concluded that not enough was being invested in National Insurance to allow payouts when those born in the stated years reach 67 years old, (given the number of pensionable years they’re expected to live after that age). The State Pension is set to rise by 1% of gross domestic product between today and 2036/7, according to Office of National Statistics figures quoted in the study.

What might be the smart reaction?

 If the SPA announcement has affected the rough retirement date of those in this age range, they broadly have two options:
  • They can either hold out for another year when the time comes (and not action the rest of their retirement income options, if they have any)
  • Or re-assess their overall financial plan for retirement by looking at their current savings products now.
If you’re holding out, fine. Otherwise – in the light of this announcement to raise the State Pension Age for those in their late 30s and early 40s – if you are making essentially pay-as-you-go payments into products without fixed contributions (such as ISAs, personal or stakeholder pensions), it might be worth collaring an adviser and really assessing if your current contributions are now going to be enough. The same applies if you are in a savings vehicle with a set payment schedule each month. For both fixed and un-fixed regular payment plans, it would also be smart to look at the underlying investments. Remember that your regular payments are just one component of your coffers; don’t forget the funds that aim to generate this growth on your savings. This blog last week summarised the mixed bag that is fund management: how to get familiar with the industry providing these underlying funds, and where the charges are. Whatever you do personally in the light of this increase in SPA, we expect there are a few of you who will agree with AgeUK’s verdict that the UK Government is, “picking the pockets of everyone in their late 40s and younger, despite there being no objective case in Age UK’s view to support it at this point in time”. Cheer up! With a qualified IFA on your side, no pensions problem is too much. So many options exist to get round problems – it’s just a question of knowing what they are.

Ready to chat with
a specialist?

Get started

You may also be interested in

Lessons in Succession Planning from the British Royal Family

As we navigate through life, one thing remains certain: change is inevitable. Whether in our personal or financial lives, a solid plan for the future is crucial. When it comes...

Read more

How do I know when I’m ready to start investing?

Investing is a powerful tool. It can help build long-term wealth, achieve financial goals and secure your future. The question people often have is, ‘How do I know when I’m...

Read more
Spring Budget 2024

Spring Budget 2024 – What You Need to Know

The Conservative Party appears to be a ship heading towards an iceberg. When Ipsos published its latest UK opinion poll results and voting intention in February 2024, it showed Labour opening up...

Read more

10 Creative Ideas to Make Your Own Christmas Decorations

Like other styles and trends, Christmas decorations have evolved and changed over time. Those of us of a certain age will undoubtedly remember the staple holiday décor of decades past....

Read more