Retirees face ‘new wave of uncertainty’ if state pension age changes

The change to the state pension age was already scheduled to increase from 66 to 67 by 2028, and eventually up to 68 between 2044 and 2046. However, new reports suggest that it could rise to 68 by the end of the 2030s.

Age UK warned that accelerating the rise of the state pension age “will condemn millions to a miserable and impoverished run up to retirement”.

As the Spring Budget approaches, there are predictions that the Chancellor may bring this change forward.

Mark Gregory at Equity Release Supermarket said: “The upcoming spring budget announcement is predicted to bring a new wave of uncertainty to retirees or those currently planning to retire.

“A key announcement expected to be made, which may be a cause for concern and will directly affect those planning to retire, is the bringing forward of the already scheduled increase to the state pension age.”

The change to the state pension age was already scheduled to increase from 66 to 67 by 2028, and eventually up to 68 between 2044 and 2046.

This change means that many people who are planning to retire at 66 will have to alter their plans.

By raising the age, those currently aged 54 years or younger today would miss out on a full year of state pension payments.

Mr Gregory continued: “Those hoping to retire before 67 will have to rely on savings and withdrawing money from their private pension pot perhaps earlier than expected to fund their retirement.

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“An option may be to delay retirement and continue working to make up for this loss of retirement income. However, this is clearly less than ideal and working into their 60s is simply not an option for many people due to health and lifestyle reasons.

“Many people will not want to disrupt their financial planning by accessing their private pension schemes earlier than anticipated or by making changes to their intended budget in other areas.”

The outcome of the UK Government’s second review of the state pension age is due to be published before the deadline on May 7, 2023.

What will the state pension age review consider?
The review will consider a wide range of evidence, including:

  • Examining the implications of the latest life expectancy data
  • Providing a balanced assessment of the costs of an ageing population and future State Pension expenditure
  • Consider labour market changes and people’s ability and opportunities to work over state pension age
  • Developing options for setting the legislative timetable for state pension age that are transparent and fair

With all these proposed changes it can be tricky for people to know exactly when they will qualify for state pension and be able to retire.

Fortunately, the UK Government has provided a free and easy-to-use online tool which gives an exact date for state pension qualification, just by entering one’s gender and date of birth.

The tool provides information on when the user will:

  • Reach state pension age
  • Qualify for Pension Credit
  • Be eligible for free bus travel – which is 60 years old for everyone in Scotland

Mr Gregory explained that equity release could be a suitable option for those needing to access cash to help fund their retirement, although it’s not right for everyone.

He said: “We are seeing an increase in equity release being used as an affordability bridge between financial needs now, to the start of pensions in payment. This is just one solution for homeowners age 55+, and by speaking to a specialist, all options can be explored.

“Equity release is available for homeowners over the age of 55 who wish to free up some of the money that has been built up in the equity of their home. This gives homeowners the option to continue living in their homes, while simultaneously releasing equity, tax-free. The plan is repaid when the homeowner dies or moves into long-term care.

“The money released by an equity release plan can be used for any sensible purpose. Many people taking out equity release use it to pay off debts, help them deal with the increased cost of living, gifting to family members and in general enjoy a more comfortable retirement.

“Equity release schemes are effective ways to access additional money in retirement, but good financial habits and a consideration of your monthly budget must be maintained.”

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