State pension age warning as rise could create ‘perfect storm’ for older Britons | Personal Finance | Finance

The rising state pension age could lead to a “perfect storm” of challenges for those who have not saved up for their older years, an expert has warned. Experts at longevity thinktank Phoenix Insights spoke to after a stated the state pension age may have to increase to 71 by 2040.

Catherine Foot, director of Phoenix Insights, told “Increasing the state pension age will mitigate some of the funding challenges, but delaying access to state pension payments alongside the under-saving crisis creates a perfect storm for worsening pre-retirement poverty.

“We need to take a step back and look at the role the state pension plays alongside other policies such as auto-enrolment and working age benefits to develop a system that genuinely addresses the realities of inequalities in work, health and savings.

“We also need to radically change the way that we think about working in later life, enabling and supporting people to continue in work until their late 60s if they want to or need to.”

She also warned that linking the state pension age to longevity predictions and life expectancy is not an adequate way to solve the problem of paying for the state pension as there are “deep and growing inqualities” in the UK.

She explained: “Many people fall out of work years and sometimes decades before reaching state pension age – due to factors such as ill health or disability – and members of this group are often disproportionally lower earners.

“Phoenix Insights’ research shows over-50s leaving work due to ill health have just five percent of the wealth of those who retire by choice.”

The state pension age is currently 66 with a timetable in place for this to increase to 67 between 2026 and 2028, and then to 68 between 2044 an 2046.

But the Government has previously looked at the idea of bringing forward the move to 68, with a decision on this issue set to be made during the next Parliament.

Patrick Thomson, head of research and policy at the thinktank, said: “Bringing forward the timeline for increasing the state pension age to 68 is a potential lever the Government could pull to mitigate some of funding challenges.

“But this could leave up to seven million people retiring later than planned. Any increases to the state pension age must be combined with policy interventions to support those unable to work up until their late 60s, so we don’t see more people falling into pre-retirement poverty.

“We need to ensure the state pension system is adequate for those who need it as well as being fair and sustainable for those who fund it.”

State pension payments are set to increase 8.5 percent in April with the full new state pension going up from £203.85 a week to £221.20 a week.

For the latest personal finance news, follow us on Twitter at @ExpressMoney_.

Source link