‘Ominous’ state pension warning as retirement could be ‘wiped out’

A state pension age hike to 68 will take place according to work and pensions secretary, Mel Stride, with a decision set to take place after the next general election.

Speaking in Westminster this week, Mr Stride urged ministers to “grasp the nettle” and increase the age in the future.

However, an expert has expressed concern about the latest update from the Government, describing the comments as “nagging”.

Alice Guy, head of pensions and savings at interactive investor, described Mr Stride’s latest remarks as an “ominous warning” for millions of Britons.

She said: “This suggests that workers as old as 55-56 could see their state pension age rise to 68 years old, slashing £13,000 from their retirement budget.

“If a decision is made after the next election, it could mean the state pension age is raised 68 as early as 2035, giving workers only 10 years’ notice of a change.

“The Government needs to square the circle of rising life expectancies but fewer older workers.

“The state pension is becoming ever more expensive but raising the state pension age isn’t magically persuading people to work for longer.

“Many will see this as a push towards working till you drop.

“The constant raising of the state pension age could wipe out retirement altogether for too many people, and that’s a national tragedy.”

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For many, the prospect of returning to work is not one they can face for numerous reasons.

Some people are facing health problems or have been required to take on caring responsibilities, while others have chosen a lower level of income in exchange for more freedom and flexibility.

For this reason, Ms Guy has critiqued Mr Stride’s suggestion to persuade some 650,000 people, including early retirees, to return to work with a potential 2p cut to income tax.

She added: “Dangling a two percent cut in income tax isn’t going to persuade people back into work, because people don’t make decisions based on the whole country. They decide what’s best for them and their family.

“The reality is that if you want to have a comfortable and happy retirement you may well need funds, but you also need your health.”

Mr Stride suggested getting 650,000 people back into the workforce would increase the size of the economy by “about 0.2 percent”.

He explained: “This would reduce the borrowing requirement by £11billion, which would be enough to take 2p off the basic rate of tax.

“So what I’m in the business of doing is getting people back into work – because work is good for people – but also giving the Chancellor the greatest possible flexibility when it comes to setting out his stall this autumn and in the spring to follow.”

The income tax threshold has been frozen at £12,570 until April 2028.

Ms Guy also unpacked some of the figures when it comes to the state pension age, and how this could impact Britons’ pockets.

For example, if the state pension age rose to 68 by 2035, someone currently aged 55 would lose approximately £13,443 of state pension income.

Even with 10 years’ notice, they would need to save an extra £90 per month into their pension over this period to cover the shortfall.

This is assuming five percent of investment growth, which could be lower or higher depending on the economic climate.

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