By Sarah Tallentire, financial planning consultant, Armstrong Watson
The state pension age is currently 66. Two more increases are already due: a gradual rise to 67 for those born on or after April 1960 and an increase to 68 between 2044 and 2046 for those born on or after April 1977.
The Government has announced plans to bring this timetable forward. Under the new proposals, which are yet to be approved by Parliament, the state pension age would instead increase to 68 between 2037 and 2039.
The proposals follow a review which examined factors including fiscal sustainability, the economic context, the latest life expectancy data and fairness both to pensioners and taxpayers.
While we don’t know exactly when the state pension age will rise to 68, what we do know is that the rise is inevitable and, for some, it is worth considering how this will affect your retirement plans.
Who will the increase to state pension age affect?
If you were born on or before April 5 1970
There is no change.
If you were born between April 6 1970 and April 5 1978
Your state pension age is currently 67. It would increase to between 67 years and 1 month, and 68 years, depending on your date of birth.
If you were born after April 6 1978
No change. Your state pension age remains 68.
How could this affect my retirement plans?
The purpose of retirement planning is to give you an idea of what your retirement might look like.
It’s important though to ensure your plans are flexible and are regularly reviewed to ensure you are on track or if your plans needs to be adjusted to fit any evolving needs or desires.
The state pension is set to rise by more than 10 per cent in April. For those eligible for the full state pension this will increase to £203.85 per week or £10,600 per year.
If you have already decided when you would like to retire and want to stick to this timescale, you will need to take into account that you may have to work a year longer or wait a year longer, before you are in receipt of your state pension.
You may want to save more to help fund that one-year £10,600 shortfall so you can still retire at the age you had planned. Alternatively, you may want to look again at the lifestyle you had planned for retirement – for some this may mean reducing the level of lifestyle planned.
It’s also worth considering your health as this will determine how long you may be able to or want to work.
Currently, personal pensions can be accessed 10 years before your state pension is due. If you were considering retiring at 67 but find you are in the group that now cannot receive the state pension until 68, you might be tempted to access your personal pension earlier.
You might have other savings, such as ISAs. However, this could have a knock-on effect to your future standard of living in retirement.
How to make the most of your retirement
Answering the following questions will give you a better idea of how your retirement plans can be shaped.
- Do you know how much is in your pension pot(s)?
- Are you saving enough or can you make extra contributions?
- Do you have any unused contributions in the previous three years?
- Do you have multiple pension pots from different employers?
- Are there any gaps to fill in my National Insurance record?
- Have you reviewed your investment choices in your pension?
Retirement planning is an evolving process due to lifestyle, health changes and government intervention.
Therefore, it might be prudent to engage with a retirement expert who can use cashflow modelling tools to show you the impact of such changes to help you plan for any unexpected roadblocks.
If you would like to speak to one of our independent financial advisers please get in touch by calling 0808 144 5575 or email [email protected]
