Millions of Brits could see their retirement plans delayed due to State Pension changes
An expert has issued a warning that proposed alterations to the State Pension age could result in delayed retirement payments for three million individuals across the UK. The State Pension age is scheduled to begin its rise from 66 to 67 next year, with the increase expected to be fully implemented for all men and women across the UK by 2028.
As reported by the Daily Record, the intended shift in the official retirement age has been part of legislation since 2014, with an additional increase from 67 to 68 planned to take place between 2044 and 2046.
The State Pension age review, published in 2023, considered the impact of bringing the official age of retirement forward to 2041-2043. This was a heated topic during Rishi Sunak‘s administration due to the increasing longevity of the population, which essentially places pressure on the UK Government to maintain support for the State Pension in its current form.
The Conservative government at the time had plans to review the State Pension age increase to 68 within two years of the general election.
However, these plans were effectively put on hold when Sir Keir Starmer and the Labour Party took power on July 4.
However, this could be something the UK Government considers in the near future, as it must adhere to the principle of providing people with a 10-year notice period for any changes to the State Pension age – or risk another situation similar to the one affecting an estimated 3.5 million women born in the 1950s.
Phoenix Insights, a think tank, has issued a warning that approximately three million individuals could experience a delay in their retirement plans if the State Pension age increase to 68 is expedited.
The Department for Work and Pensions (DWP) has released new figures showing that there are currently 13 million people claiming the State Pension, including over 1.1m in Scotland. Of these, 34 per cent are on the New State Pension (post-April 2016), while 66 per cent are receiving the Basic (or Old) State Pension (pre-April 2016).
On April 7, both the New and Basic State Pensions are set to rise by 4.1 per cent, under the earnings growth measure of the Triple Lock. However, additional elements, along with working age and disability benefits, will increase by 1.7 per cent under the September Consumer Price Index (CPI) inflation rate.
Those on the full New State Pension will see their payments increase by £9.05 per week, from £221.20 to £230.25. As the payment is typically made every four weeks, this amounts to an uplift of £921.
This will result in annual payments rising by £473.60, from £11,502 to £11,973, over the 2025/26 financial year.
However, it’s crucial to note that not all of the 4.1m people on the New State Pension receive the full amount as it is linked to National Insurance Contributions.
To be entitled to any State Pension, individuals need to have paid at least 10 years’ worth of National Insurance Contributions (NICs), and around 35 years for the full rate, which can be more if someone has been ‘contracted out’.
Those receiving the full Basic State Pension will experience a weekly payment increase of £6.95, rising from £169.50 to £176.45, or £705.80 every four weeks. This translates to an annual increase of £361.40, from £8,814 to £9,175.40, during the 2025/26 financial year.
Patrick Thomson, head of research analysis and policy at Phoenix Insights, commented: “April’s 4.1 per cent State Pension uprating will provide some relief to pensioners while cost pressures remain high. Since 2012, the Triple Lock has increased the State Pension each year by the highest of inflation, wage growth or a 2.5% minimum, and April’s uplift is the fourth highest since it was first applied.
“However, the State Pension remains at a critical juncture with questions remaining over its long-term affordability and the future of the Triple Lock. Projections suggests there will be five million more State Pensioners in the UK by 2070 compared to just one million more people of working-age.”
Thomson added: “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. Bringing forward the State Pension age increase to age 68 to the early 2040s would impact nearly three million people and not everyone will be able to work to a later State Pension age.
“We are expecting another State Pension age review in this parliament which should offer more clarity on the timetable of the future increase to age 68.”
He further stated: “It’s important that any future change to the State Pension is combined with policy interventions to support greater retirement adequacy, including enabling people to remain in work later in life and boosting pension saving through auto-enrolment.”
Future State Pension increases
The Labour Government has committed to uphold the Triple Lock for the duration of its term. The latest predictions indicate the following projected annual increases:
- 2025/26 – 4.1% confirmed, the forecast was 4%
- 2026/27 – 2.5%
- 2027/28 – 2.5%
- 2028/29 – 2.5%
- 2029/30 – 2.5%.