Pensions will rise by 10% this year1 but the cost of maintaining the state pension is becoming unsustainable for the UK Treasury. For those of us who have maintained our belief in the automatic right to a pension when we reach retirement age, we may have to alter our expectations.
The Government has recently published a report on the sustainability of the state pension2 in the future and it does not make optimistic reading. The major finding simply states that in its current form, the state pension is too costly. Either the state pension age will have to rise rapidly, which is likely to hit the under 40s especially hard, or the ‘triple lock’ – the automatic mechanism that ensures pensions increase in line with whichever is higher — prices, earnings or 2.5 per cent, will need to be axed.
No action is expected on this until after the next General Election in 2024, and this will be a controversial topic for the Government of the time, especially as the decision will affect so many, for years to come. The current minimum age of retirement in the UK is 66 years, depending on your current age3. It’s likely that the younger you are, the longer past 66 you will be entitled to receive the state pension, but you can check your present status on the Government website at https://www.gov.uk/state-pension-age
The time you can receive your pension will rise to 67 between 2026 and 2028. In fact, between 2010 and 2028 women will actually have seen the state pension age increase by seven years4.
If you were born after 5th March 1961 and are 62 or younger today, you will not be entitled to a payout until you are at least 67. The next increase to age 68 is not planned until 2046 but with the growing recognition that the state pension is becoming unaffordable, it is rumoured that the Government is considering bringing that forward. As it stands, someone currently aged 45 or younger won’t get their state pension until aged 684.
The Government aims to limit the rise in state pension costs between now and 2070 to 6 per cent of GDP (Gross Domestic Product). In order to achieve that either the state pension age will have to go up or the ‘triple lock’ will have to be scrapped and millions of pensioners would see their standard of living fall as incomes fail to keep pace with the cost of living4.
- The Time Money Mentor (2023) State pension increases 2023. Available at: https://www.thetimes.co.uk/money-mentor/article/state-pension-increase/ (Accessed 22nd May 2023)
- HM Government Department for Work & Pensions (2023) State Pension Age Review 2023. Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1147389/state-pension-age-review-2023.pdf (Accessed 22nd May 2023)
- Gov.UK (2023) Check your State Pension age. Available at: https://www.gov.uk/state-pension-age (Accessed 22nd May 2023)
- Beard, J. (2023) When will you get your state pension?. Available at https://www.thisismoney.co.uk/money/pensions/article-11961943/So-state-pensions.html (Accessed 22nd May 2023)
All the information in this article is correct as of the publish date 25th May 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.