A whole host of people will be impacted by the changes from next year
The Pensions Act 2014 accelerated the increase in the State Pension age from 66 to 67 by 8 years(Image: Getty Images)
The State Pension age is set to begin rising from 66 to 67 next year, with the increase expected to be completely implemented for all men and women across the UK by 2028. This planned change to the official retirement age has been scheduled since 2014, with a subsequent rise from 67 to 68 planned to take place between 2044 and 2046.
The Pensions Act 2014 accelerated the increase in the State Pension age from 66 to 67 by eight years. The UK Government also modified the phasing of the State Pension age rise, meaning that rather than reaching State Pension age on a particular date, individuals born between 6 March 1961, and 5 April 1977, will be entitled to claim the State Pension once they reach 67.
Specialists say that people need to prepare for the alterations so they won’t be caught off guard financially. All those impacted by modifications to their State Pension age will receive correspondence from the Department for Work and Pensions (DWP).
Chancellor Rachel Reeves last month said a review which could see the age being raised even further is required to ensure the system is “sustainable and affordable”. The Government review is due to report in March 2029 and Ms Reeves said it was “right” to examine the age at which people can receive the state pension as life expectancy rises.
The state pension age is currently 66, climbing to 67 by 2028 and the Government is legally obliged to periodically review the age. The Chancellor informed journalists: “We have just commissioned a review of pensions adequacy, so whether people are saving enough for retirement, and also the state pension age. As life expectancy increases it is right to look at the state pension age to ensure that the state pension is sustainable and affordable for generations to come.”
“That’s why we have asked a very experienced set of experts to look at all the evidence.”
The review was unveiled by the Department for Work and Pensions and will include an independent report, spearheaded by Dr Suzy Morrissey, on specific factors relevant to the Review of State Pension Age, along with the Government Actuary’s Department’s analysis of the latest life expectancy projections data.
Rachel Vahey, head of public policy at AJ Bell, commented: “An increase to state pension age from 66 to 67 is already slated to happen between 2026 and 2028. But it’s less clear what will happen after that.
“There is also an increase to age 68 pencilled in for 2046, but a faster increase is definitely on the cards. The first two reviews of the state pension age advocated bringing this forward, but successive governments have treated the issue like a hot potato.
“This latest state pension age review, however, may eventually force the government’s hand.
“State pension benefits are one of the single biggest expenses for the Treasury and account for more than 80 per cent of the £175 billion pensioner welfare bill.
“Without policy intervention, state pension costs are set to spiral to nearly eight per cent of GDP over the next 50 years based on the current trajectory, up from 5.2 per cent today.
“The second state pension age review in 2023 recommended that the increase to 68 should be introduced between 2041 and 2043 to help reduce costs, although the government under Rishi Sunak opted not to commit to that timetable.
“However, the new Labour government may feel it needs to consider the rise to age 68 more closely, particularly if it wants to demonstrate steps toward long-term fiscal prudence.
“What will the third state pension age review look at? The new state pension age review will look at key factors such as linking state pension age to life expectancy, its fairness between generations, as well as its role in ensuring the state pension’s long-term sustainability.
“An ageing population places an increasing burden on taxpayers, with state pension costs rising and fewer working age taxpayers to cover the cost.
“Future governments will hope that an improved economy and growing tax receipts will help alleviate some of the pressure. But that can’t be guaranteed and there needs to be a credible plan for maintaining affordability.
“One option is to raise the state pension age higher and faster than currently planned. Although the elephant in the room is that state pension age is just one lever government has to help manage the cost of the state pension – the other is reforming the triple lock.
“However, if the state pension age review calls for the state pension age timetable to be accelerated, that could provide some cover for future governments to look at reforming the triple lock in order to avert ever more dramatic rises in state pension age.”
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “There will be many factors that need to be assessed during this review of the state pension age.
“One of the most important will be healthy life expectancy which according to the latest data hovers in the early 60s.
“This means the reality is that many people will face real difficulties in continuing to work until their mid-to-late 60s and could face a sizeable income gap while they wait to receive their state pension.”
The largest rail workers’ union has cautioned that increasing the state pension age would trigger demonstrations and direct action.
The Rail, Maritime and Transport union stated that a government review had prompted concerns about a significant rise in the pension age. RMT general secretary Eddie Dempsey stated: “The UK state pension is already one of the worst in the entire developed world, which is a direct result of decades of governments transferring both our national and personal wealth to the super rich.
“Any decision to squeeze more out of working people by forcing us to work even longer would be a national disgrace.”
He went on to say: “Our members work in physically demanding, round-the-clock, safety-critical jobs.
“Many already struggle to reach retirement in good health, especially shift workers.
“Raising the pension age even further isn’t just cruel and unnecessary, it’s a slap in the face to the very people who keep this country running.
“If this government makes any move to drastically increase the retirement age, we intend to lead our movement onto the streets and will not hesitate to protest nationally and take co-ordinated direct action.”