The Department for Work and Pensions (DWP) is set to raise the state pension age, a change that could leave millions of people born before 1977 substantially worse off. Currently, under rules introduced by the Labour government, individuals can start claiming their state pension at age 66. However, a planned schedule is gradually increasing this age to 67 by April 2028.
Originally, the pension age was expected to rise to 68 between 2044 and 2046. But recent plans from HM Treasury have accelerated this timetable. The Office for Budget Responsibility (OBR) now projects that the state pension age will increase to 68 between 2037 and 2039—about seven years earlier than previously planned. There is also an expectation that the pension age will climb further to 69 between 2073 and 2075.
This change means that around five million people aged 49 to 55, who were born before 1977, could be forced to wait an additional year before receiving their state pension. In today’s money, this delay could cost them approximately £12,500. When factoring in the minimum projected annual state pension growth of 2.5% over the next 11 years, the total loss could be as high as £16,500, according to calculations by Hargreaves Lansdown.
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Dr Carole Easton, Chief Executive of the Centre for Ageing Better, has expressed serious concerns about the policy. She remarked, “For too many people, their 60s are already marked by significant financial stress, living in hope that they will have enough resources until they can access their state pension. Extending the pension age only prolongs this hardship.”
Financial experts urge future retirees to take proactive steps to mitigate the impact of this policy shift. Andrew Oxlade of Fidelity advises, “If retirement seems far away, now is the time to take control of your retirement planning. Time is the most powerful factor influencing the growth of your savings—the earlier you start, the better. Employer pensions are an excellent foundation, often featuring contribution matches. Additionally, pensions benefit from substantial tax relief, making them a highly efficient saving vehicle.”
As the state pension age rises faster than expected, individuals approaching retirement are urged to reassess their financial strategies to safeguard their future income.