URGENT UPDATE: Starting in April, the State Pension age in the UK will begin to gradually increase from 66 to 67. This change, affecting millions, is slated to be fully implemented by 2028.
The Department for Work and Pensions (DWP) confirmed that this adjustment has been in the legislative pipeline since 2014, with an additional future increase to 68 anticipated between 2044 and 2046. This decision has significant implications for those planning their retirement.
The financial impact is staggering. Current projections estimate the State Pension expenditure will rise from £146 billion in the 2025/26 fiscal year to £169 billion by 2029/30. Under the Triple Lock system, pensions adjust annually based on earnings growth, inflation, or a minimum of 2.5%.
Officials emphasize the importance of a 10-year notice period for any changes to ensure individuals can prepare accordingly. This is especially crucial to avoid the backlash faced by an estimated 3.5 million women born in the 1950s, who were adversely affected by previous changes.
A new report from Phoenix Insights warns that expediting the increase to 68 could delay retirement for about 3 million people. As of now, 13 million individuals are claiming the State Pension in the UK, with around 34% receiving the New State Pension introduced after April 2016.
Those eligible for the full New State Pension currently receive £230.25 weekly, totaling £921 every four weeks, which equates to £11,973 annually for the 2025/26 financial year. However, it’s important to note that not all 4.1 million recipients receive the maximum due to National Insurance Contributions (NICs) requirements.
Individuals must contribute at least 10 years of NICs to qualify for any State Pension, with around 35 years needed for the full rate, which could increase for those who have been ‘contracted out’. Recipients of the Basic State Pension are currently paid £176.45 weekly, totaling £705.80 every four weeks, or £9,175.40 annually.
Patrick Thomson, Head of Research Analysis and Policy at Phoenix Insights, stated:
“The State Pension remains at a critical juncture with questions remaining over its long-term affordability and the future of the Triple Lock.”
He added that projections indicate there will be an additional five million State Pensioners by 2070 compared to just one million more working-age individuals.
Thomson warned:
“Accelerating the State Pension age could mitigate some of the cost challenge, but recent life expectancy projections are less optimistic, making policy change potentially more difficult.”
If the increase to age 68 is brought forward to the early 2040s, it could significantly affect nearly three million people, many of whom may not be able to work longer.
Looking ahead, another State Pension age review is expected during this parliament, which should clarify the timeline for the future increase to 68. It is vital that any changes are accompanied by policies to support greater retirement adequacy, such as enabling individuals to work longer and enhancing pension savings through auto-enrolment.
The Labour Government has pledged to uphold the Triple Lock for the duration of its term, indicating potential annual increases that could significantly affect future pensioners.
Stay tuned for more updates as this developing situation unfolds.
