What has happened with the
State Pension Age?
How Long Did You Say I Will Need To Work?
October 2010's Comprehensive Spending Review has confirmed that the State Pension Age is to be raised to 66 before both men and women will receive their State Pension.
How did all this come about?
Plans to raise the State Pension Age were drawn up by the Labour Government in response to the Pension Commission's views in 2005. It pointed out that given an aging population, the UK population faced just four stark choices:
- to work longer, or
- to pay more into private pensions, or
- to pay more in tax or national insurance, or
- to accept poorer pension(er)s
I would like to add an additional point: a combination of all four!
April and October 2010 changes all!
As per April 6th, 2010, the State Pension age for both men as well as women has changed. As per the Spending Review it has now been equalised at age 66 for both men and women. Since 1940, it has been
just 60 for women.
After these changes, women in their fifties will face more years in work.
If you are a woman age 55, or younger, you won't receive your State benefits until you are 66.
What does all this mean?
This means that women turning 60 this year will have to wait even longer before they can start receiving their State benefits which could effect their current retirement plans. For those women wanting to retire at 66, more money must now be put aside to fund for the State shortfall.
Those women who accept that they will have to work longer have now more time to save towards their pension and therefore may be able to improve their overall pension pot over time.
Anything else of importance?
The changes will now also give carers a better chance of getting a pension, and see fewer workers suffer because they haven't got a full National Insurance record.
Anyone who cares for a relative or friend for more than 20 hours a week will now be eligible for a so-called "carer's credit" that will give them the same State benefits as if they had been working.
Furthermore, we all now only need a 30-year record of National Insurance contributions, no matter whether you are male or female in order to be entitled to full State benefits.
The retirement age will go further up!
Once the State Pension age equalises at 66, by 2020, it will further increase for both men and women. These increases will be gradual, happening over two years every decade.
The age that you can claim is determined by when you were born. So, if you are under 30 today, your State Pension age is 68. If you're in your 30s, you'll retire at 67, and if you're in your 40s you'll retire at 66.
Will You Need To Have To Work Even Longer?
Earlier in 2010 one of the largest UK accountancy firms –PWC-suggested that the State Pension age should be raised to 67 as early as 2030, and increased even further, on a phased basis, to 70 by 2046?
No thanks. Not If I can help it!
Unless you act NOW, and start building wealth, your aspirations of a comfortable retirement has the potential to turn sour as longer periods of retirement leave a lasting and expensive burden on ever smaller future generations of workers.
The sad fact is that for most of us the idea of a fixed retirement age will be a fondly remembered quirk of a passed age and tax payers will only be able to retire when they can afford to maintain a lifestyle that is acceptable to them.
Which may well be substantially less than you are used to!
Instead of suffering a dismal old age consider investing your 'longer-term' savings in high yield divided stocks instead.
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