Starting in April, there will be some big changes to state pensions that will affect how much money pensioners get and when some people can retire. Pensioners are getting more money because a new tax year starts on Monday, April 6.
The triple lock guarantee says that the state pension goes up every April based on the highest of the following: total earnings growth from May to July of the previous year, Consumer Prices Index (CPI) inflation in September of the previous year, or 2.5 percent.
The 4.8% rise this year, which is in line with wages, means that people who are getting the full new state pension (for people who reach state pension age on or after April 6, 2016) will see their weekly income go up from £230.25 to £241.30. People who get the full basic state pension (the main amount under the old state pension system) might see their weekly payment go up from £176.45 to £184.90. Not all pensioners get the full state pension.
Torsten Bell, the pensions minister, said, “People deserve a good retirement after a lifetime of work and contributions.” We can make that happen for millions of people by raising state pensions faster than prices and making sure they can count on them.
“Because the change happens in monthly steps, a difference of just one day in your birthday can change your state pension age by weeks or months.” You can find out when you can get your pension on gov.uk.
“Once you know your date, think about whether this makes a gap between when you want to stop working and when the state pension starts. Take a moment to plan ahead if it does. Today, a few easy checks can really help your income and peace of mind in the future.
Kirsty Ross, proposition director for People’s Partnership, which runs People’s Pension, said, “The value of the state pension is important information for millions of people, even those who are still working, because it is the main source of retirement income for most savers.”
It’s also important for people who are thinking about retiring to know what age they can start getting the state pension. For instance, people who want to retire early will need to figure out how they will make ends meet until their state pension starts.
She said that workplace pension plans “give their members planning tools that will help them figure out if they are saving enough through automatic enrollment or other pensions to get the retirement they want.”
Rachel Vahey, who is in charge of public policy at AJ Bell, said, “Many people will be shocked by the rise in the state pension age to 67, but this is just the beginning of the story.” The state pension age will go up again to 68 between 2044 and 2046, according to current plans.
She said that in the future, a government might “need to bring this forward—and maybe even make plans to raise the age even more.” Last week, the Institute for Fiscal Studies (IFS) said that raising the state pension age would save a lot of money for the government. By the end of Parliament, the age will have gone up from 66 to 67, which is expected to save about £10 billion a year.
But it also said that past evidence shows that raising the state pension age lowers incomes and raises poverty rates among the groups affected. This is especially true for people who are already out of work and depend on working-age benefits.
Laurence O’Brien, the IFS’s senior research economist, said, “It makes sense to raise the state pension age because the savings are big and the population is getting older.” But it does lower the incomes of families, which means that more people in those age groups are living in poverty. And the people who are most affected are often the ones who can’t adapt by staying in work or using other savings, like those who are already out of work or in bad health.
Pensions UK gives advice as the state pension age changes
- Small changes in birth dates can make a big difference in when people will get their state pension. Not everyone will be affected by the change from 66 to 67 on the same day. It goes up a little bit each month instead.
- People born on or after April 6, 1960 may be eligible at 66 and one month, 66 and two months, and so on, all the way up to people born on or after March 6, 1961, who will be 67 years old when they reach the full state pension age.
- A lot of people have a general idea of when the state pension starts, but the rise might surprise some people. You can use the Government calculator to find out what the state pension ages are.
- Many people may also need to think about other rule changes as they make plans for retirement. For instance, the normal minimum pension age (the age at which someone can start getting their workplace pension) goes up from 55 to 57 in April 2028. The system isn’t easy to understand, but checking your state pension age and making a simple plan could be a good place to start.
- Keep in mind that planning for retirement is not something you can do once and then forget about. Once a year, you should check on your pension forecast, savings, and the age at which you can start receiving your state pension. This can help you avoid surprises later in life.
Pensions UK gives advice as the state pension age changes. Pensions UK updates its retirement living standards on a regular basis. These standards help people figure out if they are on track to have the kind of life they want in retirement. People can also use midlife “MOTs” or action plans to check if their retirement plans are realistic. People can take charge of their retirement once they know when it will start, if there is a gap, and make a simple plan.
