What is the State Pension Age?
The State Pension is a regular payment made to people by the Government once they reach the State Pension age, and the amount is based upon previous National Insurance contributions.
But many people – particularly those in more deprived areas – experience poor health many years before they eligible for the State Pension. The number of years spent in good health is just 53 in the most deprived parts of the country, compared to 71 in the least deprived. This means that those who are most likely to need to keep working to State Pension Age are also the most likely to face additional barriers to work in the preceding years.
The UK devotes a smaller percentage of its GDP to state pensions and pensioner benefits than most other advanced economies. Many pensions rely on income from occupational and personal pensions to supplement income one they have retired.
But despite this, recent research has shown that almost one in five people of working age in the private sector are not saving into a pension at all.
Changes to the State Pension Age
The State Pension Age is currently 66, but it will be gradually increasing for men and women and is set to rise to 67 for those born after on or after April 1960. The age when people are entitled to access the State Pension is always kept under review and is influenced by factors such as average life expectancy and may change again in the future.
The average annual income of poorest pensioners is below minimum living standards, and many pensioners face difficult financial choices. A significant proportion of workers are staying in work for an extra year at 65, until reaching the new state pension age of 66. They will be financially better off as a result, and this outcome shows that increasing the State Pension Age is an effective policy for extending working lives among the employed. Those not in work are in a much more challenging position.
Under the triple lock system, the state pension increases each April in line with whichever of these three measures is highest:
- inflation in the September of the previous year, using a measure called the Consumer Prices Index (CPI)
- the average increase in total wages across the UK for May to June of the previous year
- or 2.5%.
It is important to remember that the Triple Lock doesn’t just benefit today’s retirees; those retiring in the years to come will be affected by any reduction in the State Pension. While the small annual percentage increases will be welcome to older workers on the cusp of retirement now, they will represent much larger increases over time for workers collecting their pensions in years and decades to come.
