Retirement expert advises people to learn about state pensions
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A new review into the state pension age could leave many people waiting longer to access their pots. The Department for Work and Pensions is looking at the age of access, which currently stands at 66. The DWP has previously explained the reason for the review is because “when the State Pension was introduced in 1948, a 65-year-old could expect to spend 13.5 years receiving the benefit, around 23 percent of their adult life”. However, this has been increasing ever since and it is now estimated that a 65-year-old can expect to live for another 22.8 years, or 33.6 per cent of their adult life in retirement.
Under current legislation, there will be a gradual rise to 67 for those born on or after April 5, 1960, and a rise to 68 between 2044 and 2046 for those born on or after April 5, 1977.
But a Government review last month advised the age increase to 68 is phased in between 2037 and 2039.
Experts have warned this could leave savers waiting “several years” before accessing their pot.
Becky O’Connor, the head of pensions and savings at the website Interactive Investor, told The Guardian last month: “The idea of a long, enjoyable retirement seems set to be consigned to the history books.
“It’s no wonder today’s younger workers have little faith in the state pension being there for them at all when they stop work, with many thinking they’ll end up working forever.
“For those who find they can no longer work before they reach 68 because of age-related ill health, the inability to claim state pension presents huge issues.
“The age at which people can expect to start to experience health problems that might prevent them working is around 63, which could leave many people facing several years where they either have to rely on private pension provision, which may be inadequate anyway, or other benefits.”
Helen Morrissey, a senior pensions and retirement analyst at Hargreaves Lansdown, added: “While it had been proposed that the increase in state pension age to age 68 should be moved forward to 2037-39 – from 2044-46 – an analysis of the latest life expectancy data as part of this review could stop this in its tracks.”
There are also concerns surrounding the ditching of the triple lock.
The Government announced earlier this year that it would abandon its triple lock pledge, which guaranteed pension pots would rise by the highest of these three factors: average earnings, inflation or 2.5 percent.
Because average earnings soared by 8.3 percent, a figure distorted by the pandemic, Prime Minister Boris Johnson decided to take the earnings aspect out of consideration.
This means the state pension will now increase by 3.1 percent, September’s inflation figure.
But inflation is expected to remain well above that figure for much of this year.
Former pensions minister Baroness Ros Altmann told Express.co.uk that, for a long time, people reliant on their state pension have been “living on a pittance”.
She said: “Margaret Thatcher did this in 1979, she took away the earnings link from the basic state pension, and the state pension has not yet recovered to the level relative to earnings that it stood at in 1979.
“We have the lowest state pension in the developed world. Our state pensioners live on a pittance compared to many other countries, and we have made them worse off.
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“And what’s even worse for me is that it comes at a time when inflation is soaring.”
Analysis using The Organisation for Economic Co-operation and Development (OECD) data shows the UK’s pension is less generous compared to other countries in Europe.
For example, UK pensioners receive 28 percent of the average working wage when they retire, whereas pensioners in Luxembourg and Austria receive 90 percent of the average working wage.
When looking at the net replacement rate, which measures how effectively a pension system provides a retirement income to replace earnings, the UK also ranked lower than all thirteen neighbouring European countries.
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