The latest phasing of State Pension Age (SPA) increase is now finished.
On 6 October 2020, the SPA reached 66. Unless current legislation is changed, it will remain there until 6 April 2026, at which point the next increase, to age 67, starts to be phased in over the following two years. Thereafter the move to 68 is less certain.
Over two years ago the Department for Work and Pensions (DWP) announced that the phasing to 68 would start in April 2037 and again run for two years. However, at the time the DWP avoided introducing any legislation, saying that it would undertake a review of the latest life expectancy projections before acting. Since then, the Secretary of State at the DWP has changed three times, but there has been no news of a review. Meanwhile, the rise in life expectancy has slowed dramatically, suggesting that the step up to 68 may be delayed.
The arrival of a SPA of 66 prompted the Institute for Fiscal Studies (IFS) to publish a briefing note examining the impact of the SPA changes to date. These started with the controversial stepped increase in women’s SPA from 60 to 65 between April 2010 and November 2018. With the help of DWP data, the IFS showed that each year’s increase in women’s SPA produced a corresponding increase in the proportion of women remaining in work.
For example, the employment rate of 65-year-old women jumped from 21% in the third quarter of 2018 to 35% in the second quarter of 2020 as they were no longer able to claim a state pension. For 65-year-old men, there was also a sharp rise over the same period, from 34% in the third quarter of 2018 to reach 45% in the second quarter of 2020.
As the IFS says, “With the new state pension worth £175 per week, having to wait longer to claim a new state pension significantly reduces the incomes of most people affected by this reform.” Food for thought (and reason for reviewing your private pension provision) if your retirement planning still revolves around age 65…
If you would like further information on the above, please get in touch with one of our experienced financial planners here.
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