What would an earlier rise to the State Pension Age mean for your retirement plans?

Category: News

The government recently announced a second review into the State Pension, raising concerns that the proposed age rise to 68 could be brought forward by seven years.

The review will look into the State Pension’s fairness, sustainability, and affordability before deciding on a move that could see millions of UK adults born in the early 1970s having to stay in work for longer.

What would bringing the State Pension Age rise forward mean for you and your retirement? And how can a long-term financial plan help to mitigate its effects?

The State Pension Age could rise to 68 earlier than planned

Although it has been known for some time that the State Pension Age will rise to 68, the increase was originally due to take place between 2044 and 2046. Depending on the outcome of this latest government review, these dates could change to between 2037 and 2039.

The review is said to be considering:

  • The implications of the latest life-expectancy data
  • The costs of an ageing population and future State Pension expenditure
  • Labour market changes and potential increases in people’s ability and opportunities to work beyond State Pension Age
  • Options for setting the legislative timetable for State Pension Age that are transparent and fair.

The review – which the Department for Work and Pensions (DWP) has stated is necessary to ensure government costs are “robust, fair and transparent for taxpayers” – won’t be completed until May 2023.

In the meantime, you might consider revisiting your retirement plans to see what impact the changes could have on you.

You should always factor the State Pension into your long-term retirement plans

At Lloyd O’Sullivan, we recognise that everyone’s financial circumstances are different.

That’s why our team of holistic financial advisers get to know you and your aspirations, putting together a long-term plan that factors in your private pensions, ISA investments, and other potential retirement income such as rent from buy-to-let properties.

And while your State Pension entitlement might not provide the largest portion of your income after work, it still has a part to play.

What you’ll receive and when

Currently set at 66, the State Pension Age is due to rise to 67 by 2028.

For the 2021/22 tax year, the new State Pension is £179.60 a week (or £9,339.20 a year), rising to £185.15 a week (or £9,627.80 a year) for 2022/23.

To receive this full amount, you’ll need 35 “qualifying years” of National Insurance contributions (NICs). If you have between 35 and 10 qualifying years, the amount you receive will be calculated based on the exact number of years. With less than 10 qualifying years, however, you won’t receive any State Pension at all.

Other factors that could affect your entitlement are time spent contracted out and additional contributions made through the State Second Pension or SERPS.

Go online to check your National Insurance record to see if you have any gaps. You might be able to top up your contributions, increasing your entitlement.

You can also check your State Pension Age and check if you have ever been contracted out on the government’s website.

Starting to plan early can make your retirement easier and simpler

While legislative changes and government reviews might occasionally change the goalposts of your retirement, a robust and long-term financial plan should limit the negative impact they have on your pension.

Beginning to save early is key – whether through private pensions or auto-enrolment – and be sure to keep track of the NICs you take, as well as your prospective State Pension date.

Speaking to experts allows you to outline your aspirations for retirement. At Lloyd O’Sullivan, we can then use our decades of combined experience to put a plan in place to make your long-term financial goals a reality.

Once your plan is built, we’ll review it regularly too, ensuring you remain on track regardless of the changes that occur in the world beyond.

Get in touch

A financial plan provides confidence, peace of mind, and a sense of control of your own financial circumstances.

With the State Pension Age rise still some years away, there is ample opportunity to make up a potential shortfall – whether through increases to your workplace pension contributions or changes to your investment portfolio.

If you’re concerned about the potential effects of a rise in State Pension Age on your retirement plans, please get in touch. Email info@lloydosullivan.co.uk or call 020 8941 9779.

Please note:

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.