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State pension age to rise seven years early

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19/07/2017
The government is to back Cridland Review proposals to raise the state pension age to 68 by 2039, a full seven years earlier than planned.

The move is likely to be controversial and Theresa May’s government may face a battle to get the measures through parliament.

Nevertheless, some believe it is necessary and overdue. Tom Selby, senior analyst at AJ Bell, said: “The government simply had to grasp the nettle on state pension reform. While improvements in life expectancy have stalled in recent years, over decades the state pension system has become increasingly unaffordable. To put it simply, people are living a lot longer but the age at which they receive the state pension has barely moved in over a century. Failing to address this now would only store up problems for future generations.

“The government could well face a serious battle to get this unpopular measure through the House of Commons, however. Labour has already indicated it will oppose such reform and, with a wafer-thin majority, only a few rebellious MPs would leave the plans on a political knife edge.”

Steve Webb, director of policy at Royal London, said: “The government is right not to have left this increase in the pension age until the mid-2040s. Without this decision people of working age would have faced a heavy tax burden.”

Steven Cameron, pensions director at Aegon said that the new measures show future generations cannot retire on state provision. He added: “It’s ironic that the government is proceeding with an accelerated increase in the state pension age days after statistics show improvements in life expectancy may be levelling off, meaning this increase may be less justified on affordability grounds. A blanket increase in state pension age will be particularly concerning for those who through health concerns, job pressures or lack of employment opportunity simply can’t keep working into their late 60s.

“Requiring everyone to wait till an ever increasing age to draw a state pension is inflexible and increasingly out of sync with private pensions which can be taken from as early as age 55 and offer people a flexible and personalised transition into retirement. The clear message is that anyone who wants more choice over how and when they retire can’t rely solely on a state pension and should be reviewing their workplace or private pension provision.”

‘People expect to work longer’

New research from Seven Investment Management (7IM) shows one in seven people expect to work until they are 75 and beyond. Around 35% of people are currently saving nothing and 15% are unsure of their position. Many continue to rely on inheritance or downsizing.

Matthew Yeates, quantitative investment manager at 7IM, said: “When it comes to pensions, many are taking an ‘it’ll be alright on the night’ approach, with inheritance or downsizing being counted upon as the ultimate fall back. But there are no givens, perhaps even less so in austerity Britain and since most people can no longer access final salary pension schemes.

“A lack of financial education is holding many people back – it’s just too scary an issue for many to think about, let alone talk about. But talking is exactly what needs to happen, and seeking financial advice can really help clarify goals and attitudes to risk. On a positive note, some people are keen to take advantage of better health and improved longevity to carry on working into their 70s. However, most people want to retire early and know they can’t – and for some retirement at any age is now just a dream.”

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