State pension age could rise again as Government launches review

A new Government review could push the pension age even higher. Here’s what’s happening, who it could impact, and how to make sure you’re not left behind.

Department for Work and Pensions minister Liz Kendall has announced a review of the state pension age.

The state pension age could rise again in future as the Government has announced a review of the age at which workers with enough National Insurance Contributions will be eligible to claim the benefit.

The state pension age is currently 66 for men and women. But this will rise from 6 May 2026 to 67 for those born after April 1960.

This will rise again to 68, which is due to take effect from the 2040s, although this is planned but not legally in place yet.

The Government is legally obliged to review the state pension age every six years. It does this to ensure the system is affordable and fair.

State pension issues

However, the state pension has come under considerable criticism in recent months, thanks largely to its increasing unaffordability.

The cost of the state pension is currently around £150 billion a year, but this is set to rise to over £170 billion by the end of the decade.

The rises are legally guaranteed thanks to the state pension ‘triple lock’ policy. The triple lock ensures the state pension rises every year by either inflation, average earning or 2.5% – whichever is the highest.

Critics have warned that this locks in bumper increases which will make the entire system unaffordable by around 2034.

As such, the Government could quite conceivably hike the state pension age again. Doing so is seen as politically less difficult as it affects voters many years into the future. Reforming the triple lock would have an instant impact and is deemed extremely unpopular.

Since the Government has failed to reform welfare spending or curtailing the winter fuel payment, it looks likely it could opt for this route in order to minimise political fallout.

The results of the review won’t be known until 2029 unfortunately as the last report arrived in 2023 – the Government is only bound to announce its decision every six years.

How to protect against losing state pension

The biggest concern for workers today is they will arrive at retirement and find the state pension doesn’t pay enough to ensure a comfortable retirement. Workers today could also face working a lot longer to wait for their state pension to come due.

Deeper concerns suggest that due to the high cost of the system, by the time some younger workers retire, it won’t exist at all.

So what can you do?

The most important step is to ensure you’re contributing as much as you can to your own private or workplace pension today.

The best way to ensure you’re not reliant on a benefit that might not exist in future is to plan today how you can maximise your retirement income.

Pensions are tax efficient savings vehicles with generous annual allowances. Although you’ll face certain tax charges when you come to withdraw, valuable tax relief helps to turbocharge the long-term potential of the pot.

It is important to ensure you’re investing in the right way too to maximise the long term possibility for growth and income for your money.

Disclaimer

This article is produced for general informational purposes only. It should not be construed as investment, legal, tax or other forms of financial advice.

If in any doubt about the themes expressed, consider consulting with a regulated financial professional for your own personal situation.

Past performance is no guarantee of future results. Investments can go down as well as up and you may get back less than you started with.

Investments are speculative and can be affected by volatility. Never invest more than you can afford to lose.For more information visit www.fca.org.uk/investsmart

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