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How the New State Pension Age Will Affect Women in the UK

May 23, 2017

Andrew Stephenson Pension Expert

By Andrew Stephenson.

Independent Financial Advisor

Owing to a huge jump in life expectancy, particularly in women, and the increasing ratio of pensioners to workers, the government recently announced that the state pension is set to rise from 63 and nine months to 64 and six months for women living and working in the UK by as soon as April 2018.

These changes, made public in the Government’s 2017 Spring Budget, are a direct result of recent statistics compiled by the Office of National Statistics (ONS). According to their findings, a woman who had reached the age of 65 in 2015 could expect to live, on average, a further 20.9 years – a figure which is likely to keep rising over time.

The Downside to a Longer Life Expectancy

Of course, a higher life expectancy is good news for the people of Britain, but it also means this generation will require a much higher level of savings. Not only to cover everyday living costs but to ensure that they are able to cover possible care costs too. But in order to achieve this, it is estimated that at least six million people in this country will be required to work well into their late 60s and even early 70s.

The exact date that you receive your state pension depends on the year in which you were born. Currently, women born in the 1950s are facing greater financial hardship, due to the state pension age changes and subsequent longer wait to draw their state pension than initially expected.

Unsurprisingly, the proportion of women working into their 70s has already seen an increase, doubling in the past four years to 11 per cent, according to the ONS. This works out at around 150,000 women in the UK still working despite being in their mid-70s. However, the proportion of men working into their 70s is still higher, at 15.5 per cent.

As well as the nation living longer, another reason for the Government’s decision to implement a steep increase to the state pension age is due to the fact that the Treasury has been paying some pensioners for more years in retirement than they have spent working and paying National Insurance.

What Does the Future Hold?

Based on the assumption that people now spend 32 per cent of their adult life in retirement, the Government Actuary’s Department (GAD) has projected that by 2054 the official state pension age will be 70.

And they are not the only ones. A recent analysis for the Department for Work and Pensions (DWP), published by the BBC, suggests that workers under the age of 30 may also be unable to receive their pension until they reach the age of 70. So, the road ahead is not looking an easy one for today’s younger workers, but by putting money away now, the risk of having to work into old age can be significantly lowered. It is never too early to start saving.

Sources:

  1. This Is Money:  http://www.thisismoney.co.uk/money/pensions/article-1679780/New-state-pension-age-retire.html#ixzz4hn7b1Y2a
  2. BBC News: http://www.bbc.co.uk/news/business-39352654
  3. BBC News: http://www.bbc.co.uk/news/business-39356408
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