With an Ever-Increasing National Debt, the UK Looks Set to Increase the Retirement Age — When Do You Think You’ll Be Able to Retire?

Never before in peacetime has the UK had such a high national debt. According to the Office for National Statistics, the country had borrowed £34.1 billion in January 2021 alone, around 80% more than January 2020. The Office for Budget Responsibility (OBR) forecast borrowing will reach £394 billion by the end of the financial year in a few weeks’ time.

These figures have seriously impacted the UK’s national debt level, leaving a budget deficit of almost £271 billion. What it has also impacted is the state pension retirement age, which the government is looking at as a way of paying back some of the UK’s national debt.

This massive increase in government spending is, without doubt, down to the COVID-19 pandemic. The UK’s furlough scheme and other job support schemes, PPE provisions, coronavirus testing and the £9 billion bill for the coronavirus vaccines have been the highest level of spending by any government in peacetime.

At some point, the borrowing will have to be paid back. The government’s recent budget goes some way to demonstrating how this will be done and the state pension age is one of those ways.

The current state pension age

When the UK introduced the old age pension in 1908, the state pension age was 70; far higher than today. However, only 24% of the nation actually reached this age requirement because life expectancy in those days was far lower; 43 years old for women and just 40 years old for men. Fast forward to today and it’s a different story entirely.

Over the past 10 years, the state pension age for women has been brought in line with men’s with a phased approach. From October 2020, the qualifying age for women and men is 65 years old.

The state pension payment is only made to those who have a minimum of 10 years’ National Insurance (NI) contributions, accumulated during their working life. Currently, the maximum payment per week, per person, is set to rise to £179.60 from 1st April 2021. How much state pension you receive is based on how many years of NI you contributed.

However, the government is set to introduce further increases in the state pension age. From 2026 to 2028, the age will increase to 67 years and between 2044 and 2046, it will increase to 68 years. Whilst there are plans to bring the second phased increase forward to between 2037 and 2039, it is not yet law.

All this leads to the question, when do you think you’ll be able to retire?

When can I retire?

Technically, you can retire at an age of your choice. However, to claim the state pension, the official retirement age is 66 years, based on your date of birth. Therefore, if you were born on or after 6th April 1951 you can claim your state pension this year. But can you afford to retire?

If you had a workplace pension or a personal pension, most people retire at the age of 55 years, depending on the scheme. But a word of advice, the government has plans to increase this to 57 years from 2028. The main reasons why people retire at 55 years include:

• Retiring due to illness or life-threatening condition and life expectancy is under a year.
• You are entitled to retire in accordance with your pension scheme, if joined prior to 6th April 2006.
• Your company offers an early retirement option.

Retiring early is an attractive proposition but remember; you won’t be able to apply for your state pension until you reach the age of 66 years, or later. Another factor to consider is that due to the heavy borrowing over the past year to fund the UK’s fight against COVID-19, the government’s annual rise of a minimum of 2.5% in the state pension may be frozen over the coming years.

The government is also considering reducing the pension tax breaks currently being offered to those of pension age that have a high level of savings. However, this may not materialise particularly in light of the fact that many people nearing retirement age have had to ‘dip’ into their savings over the past 12 months to pay bills.

Do I have to retire at 66 years?

In the past, yes, you did. However, this has changed in recent years. You don’t have to retire at 66 years and can work beyond this age. Employers are not able to force you to retire, and they are not allowed to discriminate when hiring someone based on their age. That said, employers can set a condition that requires you to retire. Known as a compulsory retirement age, they have to give you a fair and honest reason, such as the job involves ‘strenuous physical work’ or there is a legal retirement age limit with some service jobs.

If you choose to carry on working past the state retirement age, you are still able to claim your state pension or can delay the payment to the point you finish working. However, you may not be able to do this with a personal or workplace pension. Each policy provider has its own regulations and you will need to investigate these individually.

What payments do I need to consider when I retire?

Everyone’s situation is different and largely depends on their level of savings, whether they have any investments, if there is a workplace or personal pension, and their overall needs. The basic essentials include:

• Living costs.
• Any travel or hobbies.
• Long-term healthcare.
• Cover for emergencies, such as home or car repairs

Once you reach the state pension age for retirement, you will be eligible for other benefits, such as:

• Lower council tax bill.
• Housing benefit.
• Support with energy bills, i.e. cold weather payments.
• Healthcare subsidies, i.e. free prescriptions.
• Free travel on national rail and bus transport.
• Free TV licence.

Ultimately, if you are planning on retiring in the coming years, make a plan before you ‘jump ship’ into retirement.

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