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The number’s up when it comes to state pension age changes

The state pension age is currently 66 years old for men and women, and it will rise to 67 between 2026 and 2028. There have been several changes to pension ages in recent years, causing confusion and anger. Knowledge is power, so it’s important to know what you’re entitled to, and when.

State pensions

From 1940 to 2010 the state pension age for women was 60, while for men it was 65. In his 1993 Budget, then-chancellor Kenneth Clarke argued that it made sense for the ages to be equalised, given a woman’s higher life expectancy. The Pensions Act 1995 followed, which would increase a woman’s state pension age gradually from 60 to 65 between April 2010 and April 2020.

The Pensions Act 2011 accelerated the timeline, bringing it forward two years earlier than originally planned and meaning that from December 2018, both men and women had the same state pension age of 65. Future age raises were also to apply to both sexes.

And increases continue to move forwards: in July 2017 the government announced further intentions to raise the state pension age from 67 to 68 between 2037 and 2039, seven years earlier than originally planned.

Of course that’s disappointing, but it’s also essential because we’re living much longer than we used to. In 1948, a 65-year-old was expected to spend 13.5 years in receipt of it; in 2017, a 65-year-old could expect to live for almost 23 more years, and in 2037 it’s expected to be 25 years.

The increases are aimed at encouraging individuals to remain in work while also helping to ensure their pension savings provide for later life.

What are you due? I encourage you to obtain a state pension forecast online at gov.uk/state-pension-age, which will show you how much you’ll receive and when you’re eligible.

Personal pensions

The minimum age to access your own pension arrangements has also been on the rise. When I started as a financial planner, you could take benefits from your personal pension at age 50. That was increased to 55, starting from April 2010.

The minimum age will increase further, to 57, in 2028, when the state retirement age increases to 67. And it will continue to go up in line with further state pension age increases, always maintaining a 10-year differential.

If you were born before April 1971, the earliest you can access your pension is when you turn 55. For those born after April 1971 it’s age 57, and if you were born after 1981 it will be from age 58.

The reality is that very few of us can afford to retire at age 55, or even 60 for that matter – but whatever the age, the point is to be aware in advance of what you’ll have when you get there!

 5 things you may not know about pensions

  1. There is no minimum age to start a pension: you can pay up to £2,880 a year into a pension for a new-born baby, and receive up to £720 in annual tax relief – even though they pay no tax.
  2. You don’t have to stop payments into a pension when you retire. You continue to receive full tax relief on contributions up to a maximum of 100% of your pensionable (not pension) income, capped at your annual allowance, or £3,600.
  3. Pensions are usually free from inheritance tax and you can nominate who should inherit the pension on your death, whether a loved one or a trust you set up.
  4. Your employer must provide you access to a pension scheme, even if you are on a low income and they don’t contribute. Using your employer’s workplace pension to save is often cheaper and more straightforward than other avenues because payments are deducted directly from your wages.
  5. If you pay 40% tax you can claim back up to a further 20% of your pension contributions, while 45% taxpayers can reclaim up to a further 25% and you can claim for recent years you missed.
 

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