The Emergency Budget bought good and bad news about pensions, according to the pensions expert Ian Robinson here at Which? He tells us what you’ll be entitled to when you (finally) retire.
1. I’ve heard the state pension age is increasing – is this true?
Yes, it’s scheduled to go up. For women it’s already rising from 60 to 65, so by 2020 men and women will have the same retirement age.
The contentious change is what happens next. The last government had planned to increase the retirement age to 66 by 2026, but the new government plans to bring this date forward to 2016 for men and 2020 for women. This is being reviewed and an official announcement will be made in autumn.
2. Does this mean I have to work longer to get my pension?
I’m afraid it does. It depends on when you’re born of course. The latest news means that anyone born before 1951 will be able to claim state pension at 65, but anyone born later is in for a nasty surprise.
All parties are talking about putting the retirement age up to 67, 68 and even older. The previous government had scheduled retirement age to rise to 67 between 2034 and 2036 and to 68 between 2044 and 2046. This all sounds a long way off, but as the current government is talking about bringing the dates forward for retiring at 66, the suspicion is that they might try and bring forward the other dates as well.
3. Will I still get a state pension? How much will it be worth when I retire?
It all depends on your National Insurance Contributions (NICs). The current state pension is £97.65 a week, but you don’t get this amount unless you’ve made enough NICs in your working life. Under the old rules men had to contribute for 44 years and women 39, but it’s now fallen to 30 years for both. So that’s a little ray of sunshine in the pension gloom.
4. What about the fact that pensions are now linked to earnings – how will this affect me?
On the surface at least, it means that people should be better off, so it’s good news. For the past 30 years or so, the link between earnings and pensions has been broken and pensions have been linked to the retail price index (RPI).
But what tends to happen each year is that earnings outstrip prices, so today’s state pension hasn’t grown in-line with the standard of living. It’s been estimated that if pensions had continued to go up in-line with average earnings from 1980 onwards, today’s pension would be worth £140 instead of £97.65.
So, the theory is that by restoring the link with average earnings, pensions will keep pace with the standard of living better than they have done in the past 30 years.
5. What if I want to retire earlier?
In theory you can retire whenever you like, so long as you’ve got enough money. You have a right to start taking your private pension at 55, but there won’t be as much in the pot as there would be at 65, so it won’t be as much as if you waited until later. The reality is that most of us have to work to 65 to get a full pension.
This is called normal retirement age. In some professions you can claim your full pension at a younger age, such as teachers, who can claim full pension at 60. The question still remains that if state pension age is increased will normal retirement age be ramped up at the same rate – or will it stick at 65? No one has properly resolved that yet.
6. Can I work longer than state retirement age?
Although a lot of people start out wanting to retire early, taking early retirement can be so expensive that a lot of people end up wanting to do the opposite and carry on working beyond 65!
So then the question is: can I force my employer to keep me on after 65? You can’t – although you can request to carry on working. The default retirement age is still 65 in the UK. There’s been a lot of discussion about it and the new government has indicated it wants to permit people to continue to work beyond 65. The rules are currently under review and by the end of the year we should know more.
Loading ...
