Millions of workers in their early 50s face a potential state pension bombshell
The warning comes as the DWP revives the Pensions Commission(Image: Vladimir Vladimirov via Getty Images)
Millions of workers in their early 50s could be hit by a potential state pension shock, with experts warning thousands of pounds each could be lost out on if the Government advances its plan to increase the retirement age. The Department for Work and Pensions (DWP) is considering whether to speed up the rise in the state pension age from 67 to 68, a change that could particularly impact those born between 1971 and 1973.
New estimates by Rathbones, one of the UK’s top wealth managers, suggest that those affected could forfeit a full year’s worth of state pension – amounting to as much as £17,774 – if the alterations are implemented five years earlier than currently scheduled.
Under existing legislation, the pension age is set to climb to 67 by April 2028 and to 68 between 2044 and 2046. However, the Government’s fresh review – expected to report in 2029 – might advance that increase to as soon as 2039. Should this occur, people aged 51 to 53 today could be among the first to feel the pinch. The losses could vary from £15,798 to £17,774, contingent on the future rate of state pension increases.
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Millions of workers in their early 50s could be hit by a potential state pension shock(Image: LordHenriVoton via Getty Images)
These figures, predicated on either a 2% inflation-linked increase or the so-called triple lock – which ensures the state pension rises by the highest of earnings, inflation or 2.5% – are outlined below:
Current age
Years until 67
1-Year state pension delay loss if uprated by 2% inflation target
1-Year state pension delay loss if triple lock is maintained (2.5% a year increase)
53
14
£15,798
£16,918
52
15
£16,114
£17,340
51
16
£16,436
£17,774
Rebecca Williams, Divisional Lead of Financial Planning at Rathbones, has issued a stark warning: “With longevity increasing and population pressures mounting, future generations appear set to face a less generous state pension regime than that enjoyed by many of today’s retirees. The situation appears particularly precarious for those in their early 50s who face the real prospect of missing out.
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“We’ve seen a number of people in their late 40s and early 50s come to us seeking greater clarity on their retirement prospects. With shifting goalposts in the pension landscape, many are understandably keen to ensure they’re on track to retire comfortably and on their own terms.
“The state pension alone is not enough for a comfortable retirement. People need a broad foundation built on workplace pensions, private savings, and the ongoing support of pension tax relief. Cracks are beginning to show in the system, and they must be addressed urgently if we are to maintain faith in the UK’s pension framework and ensure people are equipped not just to survive, but to thrive in later life.”
This cautionary note comes as the Department for Work and Pensions (DWP) resurrects the Pensions Commission, almost two decades after its initial report, to confront the escalating issue of pension insufficiency.
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Charlotte Kennedy, Chartered Financial Planner at Rathbones, commented: “With pension arrangements offering a guaranteed income for life going the way of the dodo, the onus is increasingly on people to accumulate a nest egg that enables them not just to survive, but to thrive in retirement – with sufficient resources set aside to cover the cost of care.
“While auto-enrolment has helped many build retirement savings with minimal friction, most savers remain far behind what is needed for a comfortable retirement. Efforts to bolster pension adequacy are welcome, but it’s important that new measures address the complex barriers preventing people from saving enough.”
“The self-employed must not be left out. For business owners, pensions often take a back seat to the demands of growing a business. Financial education is also essential. It remains a minor part of the curriculum, typically folded into maths or PSHE. This must change.
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“The earlier young people learn how pensions work, the more likely they are to start saving early and feel empowered to make informed financial decisions.”
The triple lock – introduced in 2010 – has been credited with boosting the incomes of many pensioners. However, with the Institute for Fiscal Studies warning it could cost £40 billion a year by 2050, its future is far from certain.
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Campaigners argue that should there be any alterations to the pension age or its benefits, it is imperative for the Government to provide clear, advanced notice. They stress the importance of avoiding a repeat of the WASPI debacle, which saw thousands of women struggling to adapt to a delayed retirement due to insufficient warning.