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Why is the State Pension age changing?

Posted on: 25 May 2016 by James Hester

Life expectancy in the UK is the highest it has ever been and the State Pension age is rising to keep pace with the extended time we will spend in retirement.

State pension age raise

The UK’s population is living longer, and that has significant implications for pensions and how we fund our later years  ̶  as the longer we spend in retirement, the bigger the pension pot we will need.

The statistics speak for themselves. In 1991, a 65 year old woman in the UK could expect to live, on average, for another 19 years. By 2015, this had increased to 24 years. As of last year, a 65 year old man could expect to live for another 21 years*. That’s compared to just 16 in 1991; an increase of nearly 6 years in just over 2 decades.

 

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Raising the State Pension age

Given the upward trend in life expectancy, the age at which you are entitled to claim the State Pension is also rising.

Many people are choosing to retire later, particularly because extra years at work can have a significant, positive effect on a workplace pension pot and contribute to a more comfortable retirement.

Until 2018 women’s State Pension age is rising to 65 and by 2020 both men and women’s State Pension age will be increasing to 66. By 2028 both men and women’s State Pension age will be increasing to 67. Find out your state pension age.  

 

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Living longer

With more people living longer and longer, it’s more important than ever that everyone thinks about their pensions. It really does have important practical implications if you end up spending much longer in retirement than previous generations.

With so many more years for you to potentially enjoy a comfortable retirement, it’s no wonder that so many more people are choosing to work longer in order to build up a decent private pension pot. In fact, by retiring at 65 instead of 55, an average earner could increase their pension pot by 60%.

Considering how long you could spend in retirement, it’s also well worth making sure you get the most you can out of your State Pension.

 

Further Information

You can find out more about the State Pension at www.gov.uk/yourstatepension and www.youtube.com/pensiontube

 

*Sources:

www.ons.gov.uk/ons/taxonomy/index.html?nscl=Life+Expectancies#tab-data-tables

www.ons.gov.uk/ons/dcp171778_426798.pdf

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Qualifying year

A complete tax year during a person’s working life in which they paid, were treated as having paid or were credited with National Insurance contributions on earnings above the weekly ‘Lower Earnings Limit’ (£112 a week in 2016 to 2017).