Autumn Statement: 'Longer wait' for state pension
- 29 November 2011
- From the section Business
Eight million people aged under 52 will have to work longer owing to moves to introduce a state pension age of 67 earlier than planned.
Under the current law, the state pension age was going to rise to 67 between 2034 and 2036, and then 68 between 2044 and 2046.
However, Chancellor George Osborne said this rise to 67 would start eight years earlier in April 2026.
He said this would secure a "long-term future" for state pensions.
Bringing in the pension age of 67 - which will take two years - would save the country nearly £60bn at today's prices between 2026-27 and 2035-36, he added.
This will, therefore, mean eight million people now aged between 42 and 51 will have to work up to a year longer and lose as much as one year's state pension.
Charity Age UK said that the move would be a "bitter blow" to many people.
The current state pension is worth £102.15 a week for those who qualify through National Insurance contributions, and will rise by £5.30 next April.
For men born before 6 December 1953, the current state pension age is 65.
For women, it has been increasing from 60 to 65 since April 2010. This affects women born on or after 6 April 1950.
Under recent legislation, the women's state pension age will increase more quickly to 65 between April 2016 and November 2018.
Then from December 2018, the age for both men and women will start to increase to reach 66 in October 2020. This is six months later than was originally planned by the government.
The changes now announced by the chancellor mean:
- People born after 5 April 1960 and before 5 April 1961 - currently aged between 50 and 51 - will have a state pension age between 66 and 67
- People born between 5 April 1961 and 5 April 1969 - currently aged 42 to 50 - will have a state pension age of 67
- People born between 6 April 1969 and 5 April 1977 - now aged 34 to 42 - already have a state pension age of 67, so these proposals will not change this
There is a state pension age calculator on the Directgov website that outlines when people are due start receiving payments.
The government said that the latest announcement was the result of rising life expectancy, and the rising cost of spending on state pensions.
This is likely to directly affect the government's plan to bring in new pension schemes for public service staff in 2015. The government wants these new schemes to have a pension age directly linked to the state pension age.
The Autumn Statement documents also reveal that future state pension age changes - such as the move to 68 - would be based on "demographic evidence" and discussions with interested groups would take place to find a process to make these changes.
Michelle Mitchell, charity director for Age UK, said: "[This] will come as a bitter blow to many people fast approaching retirement especially those in ill-health, caring for relatives and those out of work.
"Average life expectancy must not be the only factor that is considered as at the moment the huge disparities in healthy life expectancy across the country means that the poorest socio-economic groups will be required to sacrifice proportionately more of their retirement."
Mr Osborne also said in his speech that Pension Credit would increase by £5.35 a week.
Predictions from the Office for Budget Responsibility estimate a growing divergence between the Consumer Prices Index (CPI) measure of inflation and the Retail Prices Index (RPI) measure.
This gap will grow from a difference of 0.4 percentage points in September 2011 to a 1.9 percentage point difference (CPI: 2%; RPI: 3.9%) in September 2016. This would prove to be significant for pension savers whose annual increases are now dependent on the slower-moving CPI measure.