Bad news has come for Britain’s youth in the form of a report by the Office for Budget Responsibility (ORB). Charged with providing analysis of the state of the UK pension market, particularly state pensions, the ORB have delivered some shocking results.
We all knew the UK pension market was on its knees, but the rapid requirement of an increase in working age – before retirement can be taken and pensions can be drawn – merely serves to underline the significance of the pension deficit faced by the government.
While nothing is set in stone yet, retirement ages are certainly set to increase sooner rather than later. The aspect which will come as a further blow to those that have saved their own hard-earned capital into a private pension may find they are unable to draw their pension at the current age of 55, this too is set for an extension.
Currently the state pension age for men is 65 and for women 62, but by 2018 women will join the men at 65. From there on in, every few months will see an extension until the retirement age hits 66 in 2020.
There are no further increases planned until 2026 when the same 2-year increase spread will see the new age of 67 reached in 2028. Market watchers have predicted that by 2050, retirement age could potentially be 75. This means an increase of the retirement age by one year roughly every three years.
Second Term
The Coalition are hoping for a second term – although many see the Liberal Democrats as unlikely to be invited into an agreement with the Tories for a second time – and if they do, all evidence points towards an attempt to actually speed the age increase proposals up by 10 years or more.
With the growing life expectancy and the growing pension deficit, it is perhaps not surprising that the state pension age is set to increase so dramatically. It is certainly more of a surprise that private pensions have a chance of being affected by the age increase.
Despite the Budget announcements in April being widely lauded as positive for UK pension savers, an aspect which received less coverage was the intention to increase private pension age of access to 57 by 2028, with consultations taking place now to discuss the possibility of moving to within five years of state pension age. This move has been widely criticised and is seen as undermining the entire idea of a private scheme for which an apparent level of freedom has now been granted.
The Treasury seems keen on this proposal, a proposal which would have serious repercussions for anybody aged 40 or under with a pension savings.
About John Cassidy
