State pension: Savers warned long enjoyable retirement to be ‘consigned to history books’

State pension: Expert on difference between ‘old’ and ‘new’

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The state pension has been a subject of intense political debate in recent months after Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak decided to scrap the triple lock. It means that state pension payments will only increase by 3.1 percent, in line with September’s inflation figure. Many had anticipated that it could increase by 8.3 percent in line with the distorted average earnings figures – but the Government deemed such a rise in payments to be unfair. Another key issue is the state pension age.

Last month, it was reported that the Government could accelerate plans to move the state pension age to 68.

Initial plans would have meant that, by 2046, those born on or after April 1977 would need to wait until they were 68 before they could draw the benefit.

But a Government review last month advised that the age increase is phased in between 2037 and 2039.

Either way, many fear that, with the state pension age only likely to go upwards in the long term, young people could now be forced to work much longer than they had planned when they reach retirement age.

Becky O’Connor, the head of pensions and savings at the website Interactive Investor, told The Guardian last month: “The idea of a long, enjoyable retirement seems set to be consigned to the history books.

“It’s no wonder today’s younger workers have little faith in the state pension being there for them at all when they stop work, with many thinking they’ll end up working forever.

“For those who find they can no longer work before they reach 68 because of age-related ill health, the inability to claim state pension presents huge issues.

“The age at which people can expect to start to experience health problems that might prevent them working is around 63, which could leave many people facing several years where they either have to rely on private pension provision, which may be inadequate anyway, or other benefits.”

Helen Morrissey, a senior pensions and retirement analyst at Hargreaves Lansdown, added: “While it had been proposed that the increase in state pension age to age 68 should be moved forward to 2037-39 – from 2044-46 – an analysis of the latest life expectancy data as part of this review could stop this in its tracks.”

One issue that has been raised by some critics of the current system is the impact of different life expectancy rates around the country.

A recent report found that, while a man living in the London borough of Westminster could be expected to live until the age of 84.7 years, in Blackpool it would be 74.1 years.

After COVID-19, some have argued that the state pension age should actually be reduced.

In August, a petition calling on the state pension age to be lowered to help open up jobs for younger people was created.

It said: “Young people are struggling to find work and losing their jobs, due to the pandemic.

“Why not allow older people to retire earlier, thereby freeing up jobs for young people?

“There would be a cost, however surely a far more positive cost than paying Universal Credit?

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“Not to mention the option of restoring the balance back into young people’s favour and helping restore their future.”

However, former pensions minister Steve Webb told in November that calls for a lowered state pension age “won’t achieve anything”.

He said: “It’s just unrealistic, the calls for the pension age to be lowered won’t achieve anything.

“Yes we have had Covid, but broadly life expectancies are still going up. There’s already a plan to move the pension age to 67 within this decade and later 68.

“Everyone would like to access their pension at 63 but even if there were those billions, wouldn’t you want NHS waiting lists down? Wouldn’t you want a decent social care system or public transport improvements?

“Even if there were those billions, it’s paying pensions to 63-year-olds who may still be in full-time work. It just doesn’t make any sense to me.

“If I’m 63 and carry on working, but you offer me a state pension instead and I stop working, that doesn’t help the economy. It takes my expertise and my productivity out of the economy.

“My job as a 63-year-old wouldn’t then get filled by a 21-year-old, there’s not an easy substitution there. I just don’t buy that argument at all.”

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