Increasing the state pension age could leaves millions of people struggling to get by (Image: Getty)
A retirement expert has warned that bringing forward plans to increase the age could leave millions of people struggling to make ends meet as they have to wait longer to get their payments.
The age is currently 66 for both men and women, and is increasing to 67 between 2026 and 2028. The age will rise again from 67 to 68, and this is timetabled for between 2044 and 2046.
But there have been reports ministers are considering bringing forward this second move. Mark Screeton, CEO at life insurance firm , warned of major ramifications if the move to 68 were brought forward.
He said: “If the age were to rise to 68 by the early 2030s rather than 2044-46 as currently planned, millions could be left struggling with no private pension savings to fall back on.
“While some may be able to continue to work until 68, there are a number of barriers preventing many people over 50 from staying in work.”
He warned that those with health or physical issues may struggle to keep working into their 50s, as well as those with caring responsibilities.
Another issue here is there can be a lack of support for people changing career in later life, and older job applicants can be discriminated against by employers.
Mr Screeton also set out one argument for why increasing the age from 2044 may make sense.
He said: “Arguably, the pension age does need to rise in line with life expectancy, but not before 2044. By 2044, pensions auto-enrolment will have been in place for more than 30 years, meaning far fewer people will be relying on the alone.
“Assuming the age for accessing a private or workplace pension does not change significantly – it is currently 55 and is due to increase to 57 by 2028 – this should mean more people will be able to retire earlier than 68 if they wish.”
A review of the age was carried out in 2023, with ministers from the then Conservative Government timetabling a decision on the move to 68 during the first two years of this current Parliament.
A spokesperson said: “There is a statutory requirement to review the age set out in the Pension Act 2014 and in line with legislation, the next review must be completed by the end of March 2029.”
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The rise in the age may prompt people planning for their retirement to make sure they have other funds available, such as private pensions and savings.
Alex Pugh, chartered financial planner at wealth management firm , pointed out the huge benefits of putting money away in your pensions.
She said: “Pensions are one of the most phenomenal vehicles for growing your money. If you’re a higher-rate taxpayer, the potential tax saving is equivalent to a 72 percent return just by putting the money into a pension.”
Saltus 2,000 high net worth individuals, meaning they have investable assets of £250,000 or more, and found that most of them underestimated how much they would need for their retirement by almost £320,000.
The study found only three percent of respondents were using their full pensions allowance, which means you can put up to £60,000 a year into your pensions. More than 10 percent had reduced their contributions over the past year.
By the early 2040s, three in five people will enter their retirement without enough saved up, modelling from Phoenix Insights suggests.
Mike Ambery, retirement savings director at , part of Phoenix Group, said: “The so-called Gen X group of people in their mid-40s or 50s now are particularly at risk.
“Many slipped through the gap between the phasing out of defined benefit schemes in the private sector and the introduction of auto-enrolment in 2012, that has meant the vast majority of workers now have a pension.”
He warned that the standard savings level under auto-enrolment, which requires a minimum contribution of eight percent of the worker’s earnings, will provide only a basic standard of living in retirement.
Mr Ambery warned: “For those looking to take control of their finances we’d recommend gathering information about your savings and using free tools to work out the level of income you’re on track for in retirement.
“These will often show how outcomes will change with additional contributions and allow you to weigh up whether additional saving is required.”
Standard Life has a pension calculator you can use to work out how much you will have saved up for your later years by the time you retire.