In July, the government announced that it will bring forward by as much as 7 years the date on which the qualifying age for receiving state pension will rise to 68.

While this change had been planned to take place in 2044, the announcement means that the jump from a pensionable age of 67 to 68, for both men and women, will now take place between 2037 and 2039.

The result will be some 6 million people, who are currently aged between 39 and 47, having to wait a year longer to begin receiving state pension. If you were born between 6 April 1970 and 5 April 1978, then this is you.

If you are under 39, the age at which you will be able to start claiming state pension will be revealed in future announcements.)

 

Why are they doing this?

It’s not difficult to guess. For the government, making funding of the state pension sustainable into the future is a significant headache.

It had been due to spend 6.5% of Britain’s GDP on the state pension by 2039/40, but by bringing forward the date at which state pensionable age rises to 68, this figure can be cut to 6.1%.

The saving to the taxpayer, according to the government, will amount to £74bn by 2045/46.

 

But I’m building up my private pension? Do I care?

For anyone planning for their own retirement, as the majority of PWS clients are (even if this is still some way off), this decision must be seen as far more than a minor irritation.

Firstly, while you will not be planning to survive off your state pension, it will still be a contributing element in your annual income after you retire. So it’s important to know how much you can expect to receive, and when you can expect this to commence, in order to have as complete as possible a view when planning the use of your private funds

It also seems likely that, with private pension funds facing large deficits, and so battling to resolve an almost identical challenge to that confronting the government, they too may make changes to qualifying ages and start dates.

“This is another indicator that past ‘promises’ offered by pension schemes cannot be relied upon and ‘tweaks’ will continue to happen if it means cost cutting and saving the scheme billions of pounds,” says our Senior Private Client Adviser at PWS, Paul Green.

“It’s not dissimilar to the last major government overhaul of Public Sector Pensions. In that case, they switched from using Retail Price Index inflation growth to Consumer Price Index inflation growth. Few savers would even have known what was happening, but that switch saved the government billions of pounds. Meanwhile, the members of the schemes lost tens of thousands each in retirement income.”

 

If you’re a PWS client, it’s important to talk over the pension age changes with us

As you’ll know if you’re a PWS client whom we advise on pension planning, we take the view that solid retirement planning depends on having as complete a picture as possible of all assets and all risks, as well as of all expected responsibilities and obligations.

Only with this information to hand can you put in place effective plans to counteract shortfalls.

Anybody can find out for themselves via the government web portal how much they can expect to receive in state pension, and when they are due to begin receiving this.

If you are a PWS client, however, it’s both easier and of greater value to ask your adviser to calculate this for you as part of your next quarterly review, so the information can contribute to a comprehensive view of your situation.

So far as your private pensions holdings go, and particularly any holdings you might have in an employer defined benefits scheme, the same applies.

“It is imperative to keep up to date with your pension schemes,” warns Paul Green, “as material changes can easily go un-noticed by members, especially when you no longer work for the company.”

As specialist pension advisers, PWS can provide you with a complete review and breakdown of every element of your pension scheme.

This includes bringing to your attention, and making plans to react to, any proposed changes that may be on the horizon; as well as assessing the impact, and making similar plans to counter the effects, of any changes that have already happened.

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