State pension age set to rise again
The government has announced plans for a further increase in state pension age.
On the day before parliament shut up shop for its summer holidays, David Gauke, the Secretary of State for Work and Pensions, announced that the government had decided state pension age (SPA) should be increased to 68 between April 2037 and April 2039. This date is seven years earlier than the SPA rise is currently legislated for in the Pensions Act 2007.
In summary, the plans mean that if you were born between 6th April 1970 and 5th April 1978, the age at which you can draw your state pension is set to increase.
Despite some of the newspaper headlines, the announcement was widely anticipated. Earlier this year John Cridland had published a final report, commissioned by the Department for Work and Pensions (DWP), which recommended an increase in the state pension age. The DWP had been statutorily due to reveal its decision on raising the SPA by 7 May, but wriggled out of the obligation due to the announcement of the snap election.
Ironically, that election had a knock-on effect on Mr Gauke’s announcement. Although he gave notice of the change, there will be no legislation to put it into effect until after the next review of SPA, which isn’t due for another six years. According to the minister, this delay is “…to enable consideration of the latest life expectancy projections and to allow us to evaluate the effects of rises in state pension age already under way”. It may also be related to the government’s thin majority, the controversy still waging around the ongoing increases to women’s SPA and the Labour’s Party manifesto commitment not to increase SPA beyond 66 without first undertaking (another) review.
For all the political manoeuvring, SPA increases look inevitable in the longer term. The new single tier state pension may be under £160 a week, but with an ageing population it is an expensive benefit. According to Mr Gauke, the change announced in July would save £74bn by 2045/46.
If you want to have more freedom when it comes to choosing your retirement date, the lesson to be drawn from July’s announcement is that you need to make sure your private pension provision is adequate.
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