Government to delay rise in pension age to 68

According to the reports from Government sources in January, ministers were planning to push forward the rise in state pension age to as early as 2035. This was in response to lobbying by the Treasury with the intent to save billions in state pension payments. Currently, this isn’t planned until 2044 to 2046, so a substantial reduction in years, with the state pension age rising to 67 phased in between 2026 and 2028. (Royal London: March, 2023)

However, this decision has been scrapped until at least after the next general election, presumably to avoid the negative backlash for older voters.

Arrange your free initial consultation

Added to this, due to the Government’s mandate to keep the normal minimum pension age (NMPA) in a 10-year step with the state pension age, it was suggested that the NMPA would rise to 58 to match this, having currently sat at age 55. 

This would mean that we could see a NMPA of 58 years old as early as 2035, severely impacting retirement plans for millions. (Metro: March, 2023)

However, due to the Government’s recent decision to delay the rise until sometime after the next election, these plans are now up in the air. 

What is the ‘normal minimum pension age’?

The normal minimum pension age refers to the age you must be before you can start taking money from your pension and is determined by the Government. 

This is not to be confused with your pension retirement age, which is the age you decide to retire at, or the state pension age, which is when you can access your state pension and is generally around a decade after the NMPA. 

You may choose to retire years after you reach the required normal minimum pension age, but you will still be eligible to begin taking money from your private pension so long as you have reached the minimum pension age set out by the Government. 

Essentially, the NMPA serves as the threshold after which you can withdraw income from your private pensions. It’s the earliest point in your life when  you’re allowed to withdraw a tax-free lump sum or income from your pension without incurring a penalty. (The Guardian: March, 2023)

Why is the Government backtracking now?

The biggest concern that comes with the increases in the state pension age and NMPA is the general disruption it will cause to those trying to plan for their retirement, with middle-aged workers potentially affected the most. The Independent Age charity said its research demonstrated how previous changes to the pension age had caused an increase in poverty among certain demographics.

“Bringing forward the rise to 68 would have meant more people struggling financially in their mid-60s and beyond,” it said.

With inflation and cost of living on the rise and, the war in Ukraine destabilising the financial sphere, increasing the state pension and NMPA age would be incredibly painful for many people.  

Further concerns were outlined in the State Pension Age Review 2023, published on the 30th March. The review outlined that since the 2017 State Pension Age Review was undertaken, the rate of increase in life expectancy has been slowing.  

“For example, in the 2014-based projections that informed the 2017 Review, life expectancy at age 65 was projected to reach 27.3 years by 2060, whereas in the latest 2020-based projections it is projected to reach 24.4 years. For most people and communities this does not represent falling life expectancy, as life expectancy at age 65 is 20.9 as of 2020, but a slower rate of future improvement.” – State Pension Age Review, 2023.  

Essentially, due to the slowing seen in the recent increases in life expectancy, the Government has decided to defer the 68 years State Pension age until more information can be gathered. The increase was originally going to be implemented under the assumption that the increases in life expectancy remained consistent, and therefore will need to be reviewed again against the new findings from the 2023 report before the increase in State Pension age can be implemented.  

On a much less altruistic note, with the general election on the horizon next year and the riots in France over a planned increase in the country’s state pension age, MPs may be worried about angering voters at a time where they want to be garnering support as election day draws nearer, and it is thought that this line of thinking formed part of the motivation for the delay until after the election.

With the NMPA as well as the state pension age on the rise, it’s more important than ever to manage your retirement plans carefully to ensure you don’t get caught out. If you want to find out more about how you can navigate these changes, while keeping true to your retirement goals, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with one of our chartered advisers to find out how we might be able to help you.

Arrange your free initial consultation