26 Jul Rise in State Pension Age announced
This month the Department for Work and Pensions announced an acceleration of the timetabled increases to the State Pensions Age (SPA) in the UK.
The new increased State Pension Age will affect those born between 6th April 1970 and 5th April 1978. The State Pension age for this group is currently age 67, and this will now increase to between 67 years and 1 month, and 68 years, depending on the date of birth of the individual.
There is no change for those born before 5th April 1970, or those born after 6th April 1978 at this time.
However, no need to panic as the proposed change has to be agreed by Parliament and this is unlikely to happen within the current government’s term which means it won’t happen before 2022 as they fear they are unpopular enough at the present time without introducing this just yet.
It is interesting to note that the latest findings of a slowing of increased life expectancy have not yet influenced proposed policy changes in this area. This is largely because the State Pnsion system is already under significant financial pressure due to the number of people already in receipt of a pension. This situation is likely to be under further pressure given that a significant increase to the number of pensioners is expected over the coming years.
The proposed changes to SPA will also influence the approach that many employers take with regard to their pension and employee benefits offerings, and in particular the upper age limits of such benefits.
Finally, it is worth pointing out that when the State Pension was originally introduced in 1908 you had to be at least 70 years old to receive it. The original ‘Old Age Pension’ as it was called passed in to law in August 1908 but the first pensions weren’t paid until 1 January 1909. There were only about 500,000 people aged 70 or more at that time and life expectancy at that age was about 9 years.
It was five shillings (or 25p in today’s money) a week and was paid in full to individuals aged 70 or more with an annual income of £21 a year or less reducing to nothing at an annual income of £31 a year. A higher pension of 7 shillings and 6 pence (62.5p) was paid to a married man. At the time only one in four people reached the age of 70. In 1940 pension age for women was cut to 60 to try to ensure for most couples that the married rate would be paid as soon as the husband reached 65.
Compare this today when we have nearly 12 million people over the age of 65 and life expectancy for the so called “baby boomers” is 91 for women and 88 for men. It’s even longer for those born since 1977 so it becomes obvious that the current system is not sustainable in the long term. Add to this the percentage of the overall population in retirement is increasing that means the percentage of the working population is reducing and it is estimated that by 2050 there will only be 3 to 4 people working for every one person retired. Who going to pay for it unless we all make our own provision and the State pension age is pushed back out to 70 again?
For more information on any of the above, please feel free to contact us.