Experts warn that raising the statutory retirement age has caused older Britons to lose £142 a week. The statutory retirement age is currently 66, but was lower until a few years ago. Between 2018 and 2020, the threshold for receiving state pension payments was raised from 65 to this age.
This has plunged many older Brits into “financial turmoil” at a time of economic uncertainty, according to financial experts.
Raising the statutory retirement age in this way more than doubled income poverty among those aged 65, according to research by the Institute for Fiscal Studies (IFS).
After this change, absolute income poverty rates in the age group increased from an estimated 10 percent to 24 percent.
One consequence of the state pension increase has been lost income among older people, with many losing around £142 a week on average in 2020/21.
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Many of those affected decided to work longer beyond retirement age, others could not.
With this in mind, financial experts are encouraging people to start building their retirement savings as soon as possible to mitigate further changes to the state pension.
It should be noted that further changes to the statutory retirement age are pending in the near future.
The current plan is to increase the retirement age to 67 by 2028 and to 68 by 2046, but this is subject to change.
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Tom Selby, head of pensions policy at AJ Bell, outlined the “financial turmoil” pensioners were plunged into.
Mr Selby explained: “For those on very low incomes, just a year’s increase in the statutory retirement age can be enough to plunge people into serious financial turmoil.
“And while there are ways to replace at least some of that lost income — either through work-related benefits, from your private pension pot, or by working longer hours — the evidence suggests that many people either can’t or don’t want to go that route.
“As a result, millions of people saw their state pension income plummet by an average of £142 a week, or over £7,000 over the year.
“Even taking into account the increase in personal income, the average net income fell by £108 a week.
“Anyone already struggling to make ends meet will inevitably be forced to make painful budget decisions in order to survive by losing thousands of pounds of retirement income.”
In addition, Mr Selby sounded the alarm that young people need to be aware that the statutory retirement age may be changed forever, which means they need to prepare.
He added: “People who have not yet reached the statutory retirement age – and particularly younger generations in their 20s, 30s and 40s – need to prepare for the possibility of the statutory retirement age being pushed further back.
“Increasing average life expectancy and rising state pension costs mean that the statutory retirement age is set to rise to 67 by 2028 and to 68 by 2046.
“Indeed, a previous review recommended accelerating the rise to 68 by 7 years – although this has not yet been enshrined in legislation.
“While there is some evidence of a slowdown in projected life expectancy growth – particularly in disadvantaged parts of the country – future generations still have to prepare for a world where government provides less for retirement.
“That means thinking about a sensible retirement plan and putting as much money into your pension as early as possible.”