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State pensioners who retire in future following a potential retirement age increase are set to lose more than £17,000 each, according to the latest forecasts for the impact on retirees.
Millions of workers currently aged between 51 and 53 will lose out on a hefty £17,774 if the pension age is increased to 68 one year earlier than planned, according to financial firm Rathbones.
It follows news that the government has ordered a fresh review of the state pension age, earlier than planned. The retirement age must be reviewed no later than every six years, but the last review finished in 2023, and the government has now announced a new review ahead of schedule.
With the review looming, there are fears the state pension age is set to be increased again, or current planned retirement age rises brought forward.
Under current law, the state pension age will rise from its current 66 for both men and women to 67 by 2028 and then 68 between 2044 and 2046.
But the government could bring the change forwards as part of the latest review.
Rathbones said in its analysis: “As such, if the state pension age rise to 68 is accelerated to 2039-41 instead of 2044-2046 following the review – due to conclude in 2029 – it could mean a loss of one year’s full state pension payments: £16,436 for workers aged 51, £16,114 for those aged 52 and £15,798 for those aged 53.
“Rathbones’ calculations are based on the new full state pension of £230.25 per week (£11,973 annually) and assume 2% inflation per year thereafter – the Bank of England’s target inflation rate.”
It added: “Under the state pension triple-lock guarantee (which guarantees at least a 2.5 % annual increase), those figures would rise to approximately £17,774 for workers aged 51, £17,340 for those aged 52 and £16,918 for those aged 53.”
But Rathbones added that these calculations assume the triple lock is still in place – which it may well not be by that time.
It said: “However, questions have been raised over the long-term affordability of the triple lock – which guarantees that the state pension rises each year in line with either inflation, wage increases or 2.5% – with the Institute for Fiscal Studies recently warning it could cost up to £40 billion a year by 2050.”
Rebecca Williams, Divisional Lead of Financial Planning at Rathbones, says: “With longevity increasing and population pressures mounting, future generations appear set to face a less generous state pension regime than that enjoyed by many of today’s retirees. The situation appears particularly precarious for those in their early 50s who face real prospect of missing out.
“We’ve seen a number of people in their late 40s and early 50s come to us seeking greater clarity on their retirement prospects. With shifting goalposts in the pension landscape, many are understandably keen to ensure they’re on track to retire comfortably and on their own terms.
“The state pension alone is not enough for a comfortable retirement. Individuals need a broad foundation built on workplace pensions, private savings, and the ongoing support of pension tax relief. Cracks are beginning to show in the system, and they must be addressed urgently if we are to maintain faith in the UK’s pension framework and ensure people are equipped not just to survive, but to thrive in later life.”
