3rd March 2016
As the Government announces a review of the state pension age, Jason Hollands, managing director of Tilney Bestinvest, questions whether we should be surprised by this move…
The Government review into the State Pension Age, to be chaired by Sir John Cridland, has certainly set the cat amongst the pigeons with a potential shake-up meaning millions of us will have to work much longer, possibly until we are in our mid-seventies before getting access to a state pension.
Such a move would be a very explicit recognition of the pensions time bomb that has been much talked of over the years, as the UK’s pension system – and broader welfare state – is simply becoming unsustainable.
Yet should anyone be surprised if the State Pension Age is hiked?
Ultimately such a move reflects the significant improvements in life expectancy and the need for state pension system to play catch up.
In the early 1990s, on average UK males lived to 73 years of age and women to 78-years.
Now the average life expectancy has risen six years for men to 79 and for women to 83-years. According to the UK Medical Research Council by 2030 life expectancy is expected to jump yet further to 85 for men and 87 for women.
However, a real concern has to be what a hike in the State Pensions Age might mean for the minimum age at which someone with private pension can draw their benefits, which is currently 55-years of age.
This has historically been linked to the State Pension Age, so if a hike in the state retirement age has a knock-on impact for private pensions, this could have consequences for those who aspire to retirement in their fifties, and who are prepared to make financial provision to achieve this.
With this prospect and yet another savage cut in the pension lifetime allowance shortly being implemented, it is vital for those aspiring to early retirement to look “beyond pensions” to ISAs and other investments, as part of a broader retirement planning strategy.
More than ever before, pensions can only be part of the jigsaw.