The UK’s state pension age is set to increase, affecting millions of workers in the coming years. Currently, the retirement age is 66, but it will gradually rise to 67 between May 2026 and March 2028. Looking further ahead, people retiring from 2044 may see the pension age increase to 68. However, new research suggests that some workers—especially those born after April 1970—might not be able to claim their state pension until they reach 71 or even older.
This shift is due to a combination of factors, including an aging population, increasing life expectancy, and concerns over the sustainability of pension funds. As more people reach retirement age, the financial strain on the state pension system continues to grow. Experts warn that unless changes are made, the UK may struggle to support future retirees.
Why Is the Pension Age Increasing?
The state pension age is rising to ensure there are enough workers to support the growing number of retirees. According to Les Mayhew, associate head of global research at the International Longevity Centre, the UK would need to increase the pension age to 70 or 71 to maintain the current worker-to-pensioner ratio. If preventable health issues are taken into account, this age may need to be even higher.
Between mid-2022 and mid-2032, the number of people at state pension age is expected to grow by 1.7 million, increasing from 12.0 million to 13.7 million. At the same time, people aged 75 and over will make up more than 10% of the population, compared to around 9% in 2022.
How Will This Affect Future Retirees?
Many younger workers want to retire early, but the increasing pension age could make this difficult. A Scottish Widows retirement report found that:
- People aged 18 to 29 hope to retire at 61 but are willing to work until 64 if necessary.
- More than 27% of those who have planned for retirement feel they may never be able to afford it.
With the pension age rising, many workers will need to save more on their own to retire comfortably. Pete Glancy, head of pensions policy at Scottish Widows, warned that the growing gap in retirement outcomes between current and future retirees is a serious concern. He noted that the UK has not been saving enough to provide the pension benefits that future retirees expect.
What Can Workers Do to Prepare?
With the possibility of having to work longer before claiming a pension, workers need to take steps to secure their retirement. Here are some key strategies:
- Start Saving Early: The earlier you start saving into a private or workplace pension, the better your financial security in retirement.
- Increase Contributions: Consider increasing your pension contributions whenever possible to build a larger retirement fund.
- Plan for Delayed Retirement: Be prepared for the possibility of working beyond 65 and explore flexible working options.
- Consider Alternative Investments: Look into other forms of savings, such as ISAs, property investments, or stocks, to supplement your pension.
- Stay Informed: Keep track of government policy changes regarding pensions to ensure you’re planning accordingly.
The rising state pension age means that future generations may have to work longer before receiving their pensions. While younger workers aspire to retire early, the reality is that many may struggle financially without sufficient savings. The key to a secure retirement lies in early planning, increased savings, and staying informed about policy changes. With the right approach, workers can still achieve financial independence in their later years, despite the shifting pension landscape.
Source: https://www.bordertelegraph.com/news/24927669.dwp-state-pension-age-will-rise-71-says-report/
