It’s no secret that the government wants to raise state pension age.
They may not have much choice. Many more of us are living very much longer.
By 2030, a baby girl born in the UK will have a life expectancy of 85.3 years and a baby boy, 82.5 years. These predictions, based on a study led by Imperial College London show a huge increase from the 46-year life expectancy of babies born in the early 1900s.
Back when the state pension was introduced, few people lived long enough to receive it for more than a few years. These days, with people living into their 80s on average and into their 90s in growing numbers, the exchequer simply can’t afford to pay pensions at current rates.
The state pension is one of the government’s biggest expenses, and the problem is the way it was set up. Although you gain entitlement to it by paying your national insurance contributions, those payments are not invested for you. They go to provide state pensions for current retirees. This means that state pension payments are paid for by each generation relying on the next.
What’s more, the National Insurance scheme does not bring in enough revenue to cover state pension payments, meaning the shortfall has to be made up from general taxation.
The state pension age currently stands at 66 for both men and women. Under existing plans, this will rise to 67 between 2026 and 2028. A further increase to 68 is scheduled for 2044. However, a cash strapped government might move to accelerate these planned increases.
Bringing forward the age increase and even taking it as high as 70 could be on the cards according to some commentators.
Should you start planning for a state pension delay?
The Labour government has pledged to keep the triple lock on state pensions, but simply delaying the state pension could save the government billions. It could reduce the burden on taxpayers. But what about the impact on you and your retirement plans?
If you are in good health and enjoy your career, another year or two at work might not be too terrible a prospect. But for those in lower-income or physically demanding jobs, delaying the state pension could result in significant financial and health challenges.
The good news is that you don’t have to retire at state pension age. You can still plan for early retirement, as private and workplace pensions can often be accessed from age 55 (rising to 57 in 2028)
But you will have to wait until state pension age to claim your state pension – which makes a private pension all the more essential.
You will probably be able to call on an employer’s pension, if you are an employee. These can be generous, but in many cases, you would need to make additional contributions to look forward to the kind of retirement you want, particularly if you want to take it early.
It might be better to arrange a private pension independent of your employer’s scheme. This will of course be essential if you are self-employed.
You can potentially build up a pension pot large enough to fund early retirement, and see you through until your state pension comes in. Or simply use it to boost your retirement income once you’ve passed state pension age.
Setting up your private pension
Planning for the future is one of the most important financial steps you can take, and setting up a private pension is a key part of securing your long-term financial well-being. While the idea of starting a pension may seem overwhelming at first, the reality is that it can be just as straightforward as any other savings plan—but with the added benefit of potential long-term growth and financial security.
A private pension allows you to take control of your retirement savings, helping to ensure that you can maintain your desired lifestyle when you stop working. With various pension options available, from personal pensions to self-invested pension plans (SIPPs), you can tailor your savings to suit your financial goals, risk appetite, and retirement timeline.
At Continuum, we aim to make the process as simple and stress-free as possible. Our expert financial advisers can help you explore the most suitable pension arrangements for your needs, guiding you through every step—from choosing the appropriate plan to understanding tax benefits and maximising contributions.
The sooner you start, the greater the potential benefits, thanks to the power of compound growth. To see just how easy it is to set up your private pension and take control of your financial future, get in touch with our team at Continuum today.
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How much the state pension will rise in 2025 explained - Times Money Mentor
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable retirement or investment strategy, you should seek independent financial advice before embarking on any course of action
A pension is a long-term investment; the fund value can go down as well as up and this can impact the level of pension benefits available. Pension Income could also be affected by interest rates at the time benefits are taken. Pension savings are at risk of being eroded by inflation.
The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future
Accessing pension benefits early is not suitable for everyone. You should seek advice to understand your options at retirement.
Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits.
The Financial Conduct Authority does not regulate taxation advice
