State pension age may rise to 71 – when will you get yours?

The state pension age in the UK may have to rise to 71 by 2050 in order to accommodate longer life expectancy, according to research. With people living longer and reaching age 100 at record levels, there are concerns about the sustainability of retirement savings. The shrinking workforce and rising life expectancy are creating a challenge for the ratio of workers to state pensioners, as more people quit work due to ill-health. The International Longevity Centre (ILC) has suggested that the UK state pension age may need to be raised to 70 or 71 by 2040 to maintain equilibrium. However, such a dramatic increase in the state pension age raises concerns about people’s ability to retire and the potential strain on their private pension savings. It is important for individuals to plan accordingly and take ownership of their retirement savings to bridge any potential gaps.

State pension age may rise to 71 – when will you get yours?

Research on rising life expectancy and shrinking workforce

Recent research suggests that the state pension age in the UK may need to rise to 71 by 2050. This is due to a combination of rising life expectancy and a shrinking workforce. Average life expectancy in the UK currently stands at 78.63 years for men and 82.6 for women, with more people than ever before reaching the age of 100. This has significant implications for retirement savings and the amount individuals will need to save in order to support themselves in their golden years.

Impact of longer life expectancy on retirement savings

As people are living longer, the ratio of workers to state pensioners is decreasing. The workforce is also shrinking due to more individuals leaving work due to ill-health. This has a direct impact on the number of people paying tax, which is used to fund state pensions. In order to ensure that there are enough people contributing to the workforce relative to the number of state pensioners, the International Longevity Centre (ILC) has warned that the state pension age may need to rise to 71.

Ratio of workers to state pensioners dropping

Currently, the state pension age in the UK is 66. However, it is already set to rise to 67 between May 2026 and March 2028, and then to 68 from 2044. The ILC suggests that these changes may need to happen faster due to gaps in the workforce. In fact, their latest healthy ageing and prevention index suggests that the state pension age would need to be 70 or 71 by 2040 in order to maintain the current ratio of workers to state pensioners.

Reasons behind the need for the state pension age to rise

There are several reasons why the state pension age may need to rise. Falling birth rates and an ageing population are reducing the size of the workforce, leading to decreased productivity. Additionally, stalling life expectancy, particularly during the austerity years and the COVID-19 pandemic, has temporarily eased the pressure for increases in the state pension age. However, in the long term, there will be a need to increase it to at least 68 or 69. This is further exacerbated by the fact that workers are leaving the workforce before reaching the state pension age due to ill-health, reducing the tax base available to fund state pensions.

Ill health and reduced workforce affect tax base for pensions

The combination of an ageing and ill population and a smaller working population creates significant labour shortages in the UK. These shortages are often filled with migrant labor, which presents its own set of challenges. In order to address this issue, one possible solution is enabling individuals to work for longer. However, this would require steps to be taken to improve the health and well-being of the population as a whole.

Enabling people to work for longer as a solution

The ILC suggests that enabling people to work for longer could help address the challenges posed by an ageing population and a shrinking workforce. This would involve implementing measures to promote healthy ageing and prevent ill-health. By keeping individuals in the workforce for longer, there would be a greater number of people contributing to the tax base and therefore funding state pensions.

Concerns about the dramatic increase in state pension age

However, there are concerns about the potential impact of such a dramatic increase in the state pension age. One major concern is the impact on retirement income and people’s confidence in their ability to retire. The state pension is a significant source of income for many individuals, and the prospect of having to wait until their 70s to receive it may cause worry and anxiety about their financial future. Additionally, individuals who face ill health or the need to provide care before reaching the age of 71 may have to give up work sooner than anticipated and rely on working age benefits for longer.

Potential need to claim working age benefits

If the state pension age is raised to 71, there is a potential risk that individuals may have to rely on working age benefits for a longer period of time. This could have implications for their financial situation and may lead to greater poverty later in life. It is important for individuals to consider their own financial circumstances and plan accordingly to ensure that they have enough savings to support themselves in retirement.

Risk of using up private pension savings early

Another risk associated with an increase in the state pension age is the potential for individuals to use up their private pension savings early in retirement. If individuals are forced to stop working before reaching the state pension age, they may need to rely on their private pension savings to support themselves. This could lead to a depletion of savings and may result in individuals facing financial difficulties later in life.

Quilter highlights need for at least 10 years’ notice

In light of the potential changes to the state pension age, it is crucial for individuals to have adequate notice and time to plan. Jon Greer, head of retirement policy at Quilter, highlights the importance of providing individuals with at least 10 years’ notice of any changes to the state pension age. This would allow individuals to adjust their retirement plans and ensure that they have enough private pension wealth to bridge the gap between their desired retirement age and the state pension age.

Upping contributions to private pension or saving in ISAs as possible strategies

In order to prepare for a potential increase in the state pension age, it may be beneficial for individuals to consider upping their contributions to a private pension. By doing so, they can accumulate enough savings to bridge the gap between their desired retirement age and the state pension age. Alternatively, individuals may want to save in different vehicles such as ISAs, which can be accessed before reaching the state pension age. The key is for individuals to take ownership of their retirement planning and make a plan well in advance to avoid any financial difficulties.