State Pension Age May Rise After General Election
Despite the government looking at raising the state pension age to 68, it looks like a revision isn’t on the cards. At least, not until after the next general election. The plans will take effect for those born on or after 5th April 1977, but an earlier review in 2017 suggested including people born in the late ‘60s. A further review will confirm the change, but this is expected to happen in 2026. In the meantime, those already retired will benefit from an increase to their weekly payouts.
Life expectancy for retirees has gone down by two years since the last review in 2017, and Labour is putting this down to an increase in poverty. This is only part of the reason why the review is being delayed, as various external factors need to be analysed to see if they have any effect. These include the impact of the pandemic and soaring inflation levels, which are being reviewed by two separate bodies.
As the state pension currently stands, 12.5 million people receive these monthly payments as long as they have paid enough National Insurance and have reached their qualifying age. In the new tax year, pension amounts are increasing by 10.1% due to the impact of the cost of living crisis. The new rates can be seen in the graph below.
The new flat rate pension is reserved for anyone retiring after April 2016, which will go up from £185.15 a week to £203.85. The old basic rate is for anyone who retired before this time. This will increase from £141.85 to £156.20, giving more retirees an extra £14.35 in their pockets.
Raising the pension age has always been under scrutiny, as people have been living longer. According to the Office for Budget Responsibility, the state pension bill will increase by 35% by 2027/2028, bringing it to a total of £148 billion. The Institute for Fiscal Studies, however, believes that even a yearly increase in state pension age in the late 2030s could save the government between £8 and £9 billion a year.
Critics of raising the state pension age are quick to point out that despite calling for uniformity across the UK, people are living longer in more affluent areas of the country. If various areas have wildly different life expectancies, is it still fair to keep everyone retiring at the same age? The current limit is based on spending around a third of adult life in retirement.
Current legislation for state pension age increases is to raise it to 67 for those born after 1960 and then to increase this to 68 between 2044 and 2046 for those born after 1977. The UK public will most likely take this sitting down, unlike France, which has seen massive protests in relation to increases in their retirement age. France has an incredibly low retirement age of 62, much lower than many European neighbours, but its citizens are beyond happy with the increase to 64.