UK workers born between 1970 and 1978, who may have been consider pension release in the future, could possibly lose up to £10,000 of their pot, thanks to a change in retirement age.
The UK government has recently announcement that the retirement age will now be increased to 68 for people in their late 30s and early 40s – news that has angered many people as some will lose out on as much as £9,800 from their pension fund. This sum is not unexpected given the changes, as these people will have to wait an extra 12 months to receive their first payouts. The House of Commons library said that the yearly pension would end up being around £8,300 per year, giving grounding to this figure.
Although the jump in retirement age will be gradual, it’s thought the move will save the government around £74 billion and its thought it will affect nearly 7 million people across the UK.
Plans to raise the state pension age to this level had already been documented in plans, however, for 7 years later than has been set out in this new reform.
The shadow work and pensions secretary Debbie Abrahams spoke to the Guardian to criticise the move, calling the amount “disgraceful and unjustified”.
“Millions of people to work longer to pay for their failing austerity plans,” she said, under the belief that this plan is another ploy to reduce the deficit.
The government however say that the change is about “fairness across generations.”
Work and pensions secretary David Gaukes said that it would be unfair to future generations not to act now.
The changes have been enacted based on a review by John Cridland, which recommended that state pension age needed to be increased to prevent the system becoming unsustainable.
The report, which can be read here, outlines the growing issue of retirement age versus actual life expectancy, when some of those who receive state pension may spend a third of their life in retirement: “It is projected by the office for Budget Responsibility (OBR) that the cost of the current State Pension will grow from 5% of GDP to 7.1% over a 45 year period, assuming that the State Pension age rises with longevity”.
However, Labour said in their election manifesto that they were not going to follow the Cridland review’s advice when it came to state pension age. Instead, they set out plans to equalise the age to 66 for both men and women, before looking at research into the field of UK life expectancy, which they say is slowing, making changes to retirement age unnecessary.
The government’s changes are hoped to provide a more stable pension fund which will protect future generations from facing problems accessing this, as well as provide a fair, sustainable system, where one generation is not paying more for the one proceeding it. The plan for change will be an equalised age of 65 years old for retirement by the end of 2018; rising to 66 by 2020; and finally increasing to 67 by the year 2028.