On 19th July 2017, the Government announced that the State pension age increase from 67 to 68 will now be phased in between 2037 and 2039, rather than from 2044 as was originally proposed.
This will affect the 6,000,000 people who are currently aged between 39 and 47.
David Gauke the Secretary of State for Work and Pensions, said:
“As life expectancy continues to rise and the number of people in receipt of State pension increases, we need to ensure that we have a fair and sustainable system that is reflective of modern life and protected for future generations.”
This despite research conducted by UCL published on 18th July which stated that “Increases in life expectancy are stalling after 100 years of continuous progress” in fact the rate of increase in life expectancy has nearly halved since 2010.
So, what does this all mean?
Firstly it means that those born on or after 6th April 1970 will have a State pension age older than 67 – the age that people become entitled to their State pension will gradually increase until it reaches age 68 for those born on or after 5th April 1978. Those born after this date may or may not have a State pension age of 68. The likelihood is that the age will continue to increase and those currently under 30 may well have a State pension age of 70.
Secondly, if you wish to stop working or reduce your working hours before your State pension age, you will need to have another source or sources of income to replace those from earnings. This may be from pensions/investments/rental income/residual income and so on. Currently, you can access pension monies from age 55 although it has been muted that this will increase in line with the increase in State Pension Age so watch this space.
Another thing to consider is Income Protection and Group Income Protection. Most individual income protection policies are written to a specific age which usually ties in with the individual’s state pension age. So those affected will need to consider how they will cover this gap should they be unable to work up until State Pension Age due to sickness? In the case of Group Income Protection, these are usually written to State pension age. Some providers have already said that they will honour the earlier than anticipated increase in State pension age so it may be worth checking if your provider will too.
If you are affected by this change and would like to talk to an IFA about your financial plans, contact me for a complimentary no obligation initial meeting.