State pension: Age change sees Britons lose £142 per week in their retirement | Personal Finance | Finance
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Experts are warning that older Britons lost £142 per week as a result of the increase to the state pension age. Currently, the state pension age is 66 years old however it used to be lower up until a few years ago. Between 2018 and 2020, the threshold for receiving state pension payments was increased from 65 to this age.
According to financial experts, this pushed many older Britons into “financial turmoil” at a time of economic uncertainty.
Raising the state pension age in the way resulted in a hike in income poverty among 65-year-olds to more than double, according to research from the Institute for Fiscal Studies (IFS).
After this change, absolute income poverty rates rose among the age group from an estimated 10 percent to 24 percent.
A consequence of the state pension increase was the loss of income among older people with many missing out around £142 per week on average in 2020/21.
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Many of those affected chose to work longer past the retirement age, however others were unable to do this.
In light of this, financial experts are encouraging people to start building their retirement plans as soon as possible to mitigate any further changes to the state pension.
It should be noted that further changes to the state pension age are due to happen in the near future.
As it stands, the retirement threshold age is due to be hiked to 67 by 2028 and 68 by 2046, however this is subject to change.
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Tom Selby, the head of retirement policy at AJ Bell, outlined the “financial turmoil” pensioners were thrown into.
Mr Selby explained: “For those on very low incomes, increasing the state pension age by just a year can be enough to push people into serious financial turmoil.
“And while there are ways to replace at least part of this lost income – either via in-work benefits, from your private pension pot or by working longer – the evidence suggests lots of people are either unable or unwilling to go down this road.
“As a result, millions of people saw their state pension income plummet by £142 per week on average, or over £7,000 during the year.
“Even taking into account increases in private income, on average net income plummeted by £108 per week.
“For anyone already struggling to make ends meet, missing out on thousands of pounds in pension income will inevitably force them into making painful budgeting choices in order to survive.”
As well as this, Mr Selby sounded the alarm that young people need to be aware that the state pension age may be continuously changed forever more, which means they must prepare.
He added: “People who have yet to reach state pension age – and particularly younger generations in their 20s, 30s and 40s – need to prepare for the possibility that the state pension age will continue to be pushed back.
“Rising average life expectancy and ballooning state pension costs mean the state pension age is already scheduled to increase to 67 by 2028 and 68 by 2046.
“Indeed, a previous review recommended accelerating the rise to 68 by 7 years – although this has not yet been written into legislation.
“While there has been some evidence of a slowdown in the expected growth in life expectancy – particularly in deprived parts of the country – future generations still need to prepare for a world where the state provides less in retirement.
“That means coming up with a sensible retirement savings plan and contributing as much as you can afford to a pension, as early as you can.”
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