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The Government is reportedly considering increasing the state pension age earlier than planned. While a hike to 67 in six years’ time, and to 68 by 2046 has already been mooted, The Sun reports a rise to 68 could instead come as soon as 2035.
This could prove costly for millions of Britons who will need to work for longer before becoming entitled to the state pension.
However, individuals will also lose out on a potentially substantial sum as a result.
Bringing forward the state pension increase to 68 by 2034, instead of 2046, would mean someone who is currently 57 would lose out on £13,594, according to new calculations by interactive investor.
This would rise to £16,902 for workers aged 46, the organisation added.
The calculations have factored in the new full state pension of £203.85 per week, which is set to kick in by April 2023.
This is as a result of the return of the triple lock, which will deliver a 10.1 percent increase to the state pension, in line with the September 2022 inflation figure.
It also assumes an inflation-linked uprating of 5.2 percent, forecasted by the Bank of England, and two percent inflation a year thereafter.
The organisation warned someone with a £100,000 pension pot who retires at 67 will see their money running out two years earlier, when they reach 79 years old rather than 81 years old.
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This is because the person would need to withdraw an extra £10,600 from their pension pot to tide them over until reaching state pension age at 68.
Myron Jobson, senior personal finance analyst at interactive investor, said: “Pushing back the state pension age would come as a kick in the teeth to workers who diligently paid into the welfare system under the assumption that the state pension age won’t move much – if at all.
“Our calculations show that bringing forward the state pension age from 68 by 2046 to 68 by 2034 could mean a year lost full state pension payment of £13,594 for workers aged 57 rising to £16,902 for workers aged 46.
“This is by no means a small sum and could force savers to tweak their retirement plans to maintain course for a comfortable retirement.”
Mr Jobson suggested a state pension age hike could save the Government billions in state pension payments and there could be extra income tax too as people work longer.
He explained: “More money will end up in the taxman’s coffers in taxes on extra earnings.”
However, such a move is not likely to be popular amongst Britons who will need to work longer.
The expert continued: “Workers would be forgiven in thinking that their state pension entitlement has been kicked around like political football.
“We need a public confidence boost in state and private pensions, rather than erosion.
“A lot of people rely on the state pension as their core source of income at retirement.
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“The stark reality is pushing back the state pension age will make having an affordable retirement harder for many savers.”
Mr Jobson therefore stressed it is vital for Britons to start thinking about planning for retirement themselves.
This is likely to be best achieved through private or workplace pension savings which can offer financial stability for millions.
While the expert acknowledged it is difficult to plan for retirement “when the state pension regime is up in the air”, he encouraged action to be taken as soon as possible.
A DWP spokesperson recently told Express.co.uk: “No decision has been taken on changes to the state pension age.
“The Government is required by law to regularly review the state pension age and the second state pension age review is currently considering, based on a wide range of evidence including latest life expectancy data and two independent reports, whether the rules around state pension age remain appropriate. The review will be published in early 2023.”
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