Will the age of retirement change soon?
Once upon a time, we could all expect to hang up our suit jackets or put down our tools at 65 if we were male, or 60 if we were female. However, despite this having been the status quo for a long time, the age of retirement is beginning to increase for a variety of reasons.
The increasing age of retirement
New government rules have stated that the retirement age will increase over the next few years. The most immediate effects will come before 2020, when the State Pension age for men and women will increase to 66.
These rises are occurring at a faster rate than they've ever done, and indeed, for some of the 500,000 or so women born between April 5th, 1950, and December 6th, 1953, they will need to work an extra two years than they would have done compared to the pace of change within the male State Pension age. This is due to the government equalising the female State Pension age to that of men.
The effects over your entitlement are dependent on your date of birth – check yours using the government's free tool.
If you're younger, future changes in the State Pension age are less set in stone. It is known to be increasing to 67 at some point between 2026 and 2028, and if this pattern was extrapolated into the future it will rise to:
- 68 in 2033
- 69 in 2040
- 70 in 2047
- 71 in 2054
- 72 in 2060
- And 73 in 2067
These dates should be taken with a large pinch of salt, of course – a year in British politics is a very long time, never mind multiple decades.
Going beyond the State Pension age, the age that you can access private pension pots may rise in the coming years, but the future isn't set in stone. In 2014, the government announced that the age would rise from 55 to 57 by 2028, however, no changes have yet been announced.
Why is it increasing?
Especially if you're younger, it might appear as if the rug is slowly being pulled out from under your pension, but there are reasons behind the gradual extension.
The biggest reason for increasing the State Pension age is that people in the UK are living longer. Improved healthcare and healthier lifestyles have long increased the lifespans of people in the country, changing the nature of retirement.
According to the Office of National Statistics' figures, in 1951, baby boys would have been expected to live to 66.4 years of age, girls 71.5 years. Today, male life expectancy is 79 years, and 82.8 for females. It doesn't make sense that the State Pension shouldn't reflect this rise.
The nation's finances
Rising life expectancy has impacted the nation's finances too, of course. Instead of receiving the State Pension for a few years, many now receive it for decades – some, even, could end up receiving it for more years than the amount of time they paid National Insurance.
This is bad news for the treasury – whose pension bill has risen in recent years – and as a result, the pension age has been increased.
What you should do
If you think you'll be affected by the change in the retirement age, you should begin planning as soon as possible – you don't want to be financially caught out later on in life. Work out how many extra years you may need to stay employed, and how this will impact your finances and lifestyle.
A positive of working later is that you'll have saved up more pension than you otherwise would have, giving you a better income in later life – to get an idea of how long you may live for, click here to use our life expectancy calculator.
The age that we retire is increasing, and will have sure impacts on each of our later years. Understand how the changes will affect you, plan, and you should be able to guard against any negative consequences.
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