Retirement and the New State Pension Age
The state pension age is the earliest age that eligible UK citizens are able to claim their state pension. But under the current government pension plans the age limit is set to increase in the future.
Rising State Pension Age in the UKThe basic outcome of the government’s pension reform is to delay the age at which people can claim their state pension. The previous Labour government set out plans to steadily increase the pension age to 68 for men and women. The previous pension age for men and women has been in place since the early 20th century; 65 for men and 60 for women. The most recent change came in April 2010 with a rise in the female pension age. The female pension rise is set to continue with the aim of having an equal pension with men age by the year 2020.
State Pension Age now Determined by Birth DateThe government are looking to eventually increase the state pension age to either 68 or 70 years of age. Their intentions are to raise the pension age for men to 66 by the year 2016; the previous date for this raise was 2026. At present the state pension age will be determined by the year in which the person was born. For men, the pension age of 65 is applicable for men who were born on or before 5 April 1959. For women, the applicable date is 60 years if born on or before 5 April 1950.
The Increasing State Pension Age for WomenFor women born after the 5 April 1950 the state pension age is rising. A woman who was born one month and one day after the 5 April 1950 can retire at the age of 60 years and two months. A woman born a year and a day later on 6 May 1951 can retire at the age of 61 years and two months. This will continue to increase until the state pension age for men and women has been equalled by the year 2020 at least. The government has outlined plans that the state pension age should be at least 68 by the year 2046.
Annual State Pension IncreaseThe state pension increases every year in April by 2.5% or increased by the level of the Retail Prices Index. The Retail Prices Index is how inflation is measured in the UK. But under the new plan the pension will increase in conjunction with the increase in average earnings. It may increase by 2.5% or in line with prices if either of those two factors is higher.
The Outcome of the Government’s Pension ReformThe government’s intentions are for men to work until the age of 66 until they can receive a state pension. The government want this change to happen by the year 2016; this is eight years earlier than current plans. This plan will affect all men who are presently under the age of 60. From the year 2020 women will be required to work until the age of 66 before they can claim their state pension. After the year 2020 women and men will be equal in state pension age eligibility.
Scrapping the Retirement Age in the UKMore people in the UK may have to work later in life as the age of the state pension increases. At present, employers can force employees to retire at 65 without having to give a reason. Employers also do not need to recruit anyone over the age of 65. The government’s intentions are to scrap this rule by the year 2011. This means older people can work later in life, and in the future may be working until or past the age of 70. These new rules will mean that people who do not have private pension plans will have to work later even if they don’t want to.
For the pension industry the new government reform plan is good news. Those who wish to retire earlier will no doubt increase their occupational pensions. But for a great many people the thought of working into their late sixties or even seventies is not an enticing prospect. But working later into life will soon be a very real prospect for many people in the UK without occupational pension plans.