State pension age hike may be announced by Jeremy Hunt next week

The state pension age is currently 66, after a process of age equalisation between men and women to 65, and a subsequent increase. However, this is not the end of the matter, as the state pension age will rise again in the future, with increases to 67 and 68 already confirmed.

It is the speed of these increases which is less clear at present, as the Government grapples with the best approach.

Recent reports have suggested Chancellor Jeremy Hunt may be in favour of a rise to 68 by 2035, a decision which would affect millions.

Mr Hunt could lay out his plans for this increase as soon as next week, as he unveils his Spring Budget.

Looking towards the Budget, Tom Selby, head of retirement policy at AJ Bell, shared insight.

He said: “The long-awaited state pension age review feels like the elephant in the room as we approach the Budget in just over a week’s time.

“The current plan is to increase the state pension age to 67 by 2028 and then again to 68 by 2046.

“However, reports surfaced earlier this year suggesting the government could accelerate the proposed rise to age 68 to some point in the 2030s.

“This would represent a colossal political gamble, for the obvious reason that generally there aren’t many votes to be won by telling millions of people they are going to receive their state pension later than they thought.

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“The most recent data adds more fuel to this potential fire, with average life expectancy in the UK dropping and projections of future longevity improvements scaled back.

“While it is difficult to be definitive about the cause of this shift after decades of near continuous life expectancy rises, the pandemic will inevitably have been a significant factor.”

A state pension age change could raise significant funds for a Treasury already grappling with the UK’s economic challenges, and support packages issued throughout the pandemic and the ongoing cost of living crisis.

Mr Selby estimates bringing forward the planned increase in the state pension age to 68 could raise “tens of billions in revenue”.

However, while the money raised could be an enticing draw for Mr Hunt, there are other issues to consider.

The expert added: “The big question is whether Number 10 agrees this Exchequer boost is worth the inevitable pain at the ballot box.”

A rise to 68 could affect millions, but the impact will depend on the speed at which the increase is implemented.

If the increase to 68 is brought forward by seven years to 2037-39, this could mean:

  • Anyone born on or before April 5, 1970 would have a state pension age of 67
  • Anyone born from April 6, 1970 to April 5, 1971 would have a state pension age between 67 and 68
  • Anyone born from April 6, 1971 onwards would have a state pension age of 68.

If the increase to 68 is brought forward to 2035-37, this could mean:

  • Anyone born on or before April 5, 1968 would have a state pension age of 67
  • Anyone born from April 6, 1968 to April 5, 1969 would have a state pension age between 67 and 68
  • Anyone born from April 6, 1969 onwards would have a state pension age of 68.

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If a rise to 68 was brought forward significantly to 2033 to 2035:

  • Anyone born on or before April 5, 1968 would have a state pension age of 67
  • Anyone born from April 6, 1968 to April 5, 1969 would have a state pension age between 67 and 68
  • Anyone born from April 6, 1969 onwards would have a state pension age of 68.

Mr Selby added: “For savers, the uncertainty is another reminder that while the state pension provides a valuable foundation upon which to build your retirement plans, both how much you receive and when you receive it remains at the whim of politicians.

“This is one of the reasons it is vital you build your own retirement pot, taking advantage of the retirement savings incentives on offer, any employer contributions available and tax-free investment growth.”

Mr Hunt is set to lay out his spring Budget on Wednesday, March 15, 2023.

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