The age bracket which stands to lose out the most from potential changes to the state pension age has been revealed after Labour’s recently announced review into the current age of retirement.
Millions of workers could lose more than £17,000 if an increase to the age at which the state pension can be claimed is moved forward, analysis by a wealth management firm has found.
This is one of the more commonly speculated possibilities that could come from the government’s state pension review, announced by work and pensions minister Liz Kendall last week.
Governments are legally required to carry out a review of the state pension age every six years. The last one concluded in 2023, while this one is due to finish in 2029. It must give at least 10 years' notice for any state pension age change.
Currently set at 66, and rising to 67 by 2028, the state pension age is the point at which a person is able to retire from work and receive the government-funded state pension.
The figure is set to rise to 68 by 2046, but there is a strong possibility this is pushed forward by ministers in a bid to rein in massive spending on the state pension.
Such a move was actually proposed by the previous pensions review, suggesting the rise to 68 be completed by 2039, but was never acted on by the government.
New analysis by wealth management firm Rathbones has now found that if the deadline was pushed back even to 2039-41, workers aged 51 to 53 now would stand to lose out the most.
This is because they would lose a full year of state pension payments that they would otherwise be receiving.
Because of the triple-lock guarantee, which sees the state pension rise by at least 2.5 per cent every year, workers currently aged 51 would lose out on £17,774 from the change, Rathbones calculated.
For those aged 52, it would be £16,918, and for those aged 51, it would be £17,340.
Rebecca Williams, divisional lead of financial planning at Rathbones, said: “With longevity increasing and population pressures mounting, future generations appear set to face a less generous state pension regime than that enjoyed by many of today’s retirees. The situation appears particularly precarious for those in their early 50s who face real prospect of missing out.
“The state pension alone is not enough for a comfortable retirement. Individuals need a broad foundation built on workplace pensions, private savings, and the ongoing support of pension tax relief. Cracks are beginning to show in the system, and they must be addressed urgently if we are to maintain faith in the UK’s pension framework and ensure people are equipped not just to survive, but to thrive in later life.”
Launching a new government pension commission last week, Ms Kendall noted that by the 2070s, the number of pensioners is expected to have increased by over 50 per cent, whereas the working age population will have only grown by over 10 per cent.
She said that this makes “it even more imperative to help future pensioners put into a savings pot they can rely on in the future”.
Ms Kendall warned: “My big worry is, so many young people have not even got a hope in hell of getting on the housing ladder, they’re being absolutely killed by their rent, and if you are paying off your mortgage in retirement, or still renting in retirement, that is what is driving this sort of tsunami of pensioner poverty that is coming our way.”
The minister told reporters: “Put simply, unless we act, tomorrow’s pensioners will be poorer than today’s, because people who are saving aren’t saving enough for their retirement.
“And crucially, because almost half of the working age population isn’t saving anything for their retirement at all.”
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