State pension age update as DWP makes huge announcement

Work and Pensions Secretary Liz Kendall has announced the next review of the state pension age.

The Government is required to review the state pension age every six years, but this latest review is starting earlier than expected, as the last one wrapped up in 2023. It will look at whether the current pension age of 66 is still appropriate, considering factors like life expectancy. It follows warnings that people retiring in 2050 could get £800 less per year than today's pensioners. The Department for Work and Pensions (DWP) said 45% of working-age adults were putting nothing into their pensions, while a staggering 15 million are estimated to be "undersaving". The self-employed, low-paid and some ethnic minorities are reported to be particularly affected.

Ms Kendall said she was "under no illusions" about how difficult it would be to map out plans for pensions for the coming decades amid cost-of-living pressures.

She conceded that "many workers are more concerned about putting food on the table and keeping a roof over their heads than saving for a retirement that seems a long, long way away, and many businesses face huge challenges in keeping profitable and flexible in an increasingly uncertain world".

This comes just weeks after financial think tank the Institute for Fiscal Studies (IFS) warned that the state pension age may need to rise to 74 by 2068 due to financialchallengescompounded by an increased life expectancy rate.

Giving a speech in west London today (July 21), Ms Kendall also announced that she would revive the Pension Commission to consider why future pensioners are on track to be less well off than pensioners now.

She said: "Just because pensioner poverty has fallen does not mean all the problems have gone away. Far from it. Women who are now approaching retirement have half the private pension wealth of men, so the average woman in her late 50s can expect a private pension income of just over £100 a week, compared to £200 a week for men.

"Only one in five of the self-employed are saving into a private pension, down from half in the late 1990s, meaning over three million self-employed people aren't saving anything at all for their retirement."

Ms Kendall said young people, in particular, were struggling to save for retirement because of soaring housing costs.

She said young people "haven't got a hope in hell of getting on the housing ladder" and were being "killed by rent" - which she said was driving a "tsunami of pensioner poverty".

She said: "Put simply, unless we act, tomorrow's pensioners will be poorer than today's, because people who are saving aren't saving enough for their retirement. And crucially, because almost half of the working age population isn't saving anything for their retirement at all."

The Work and Pensions Secretary said she was turning to the Pensions Commission, which last met in 2006, to "tackle the barriers that stop too many saving in the first place".

The previous commission recommended automatically enrolling people in workplace pensions, which has seen the number of eligible employees saving rise from 55% in 2012 to 88%.

The commission, which will be led by Baroness Jeannie Drake-a member of the previous commission-is expected to deliver recommendations on ways to increase retirement income in 2027. The proposals are set to extend beyond the next election.

Rachel Vahey, head of public policy at AJ Bell, said: "After 20 years, the Government has breathed new life into the Pensions Commission, reviving it to solve the pension under-saving crisis of those due to retire in the mid-century.

"After the success of the Turner Pension Commission in ushering in the automatic enrolment reforms which changed pension saving in the UK forever when they were introduced in 2012, the Government has gone back to the concept of a Pension Commission, hopeful it will bring about the next pension saving revolution."

What is the current state pension age?

From October 2020, the state pension age for both men and women rose to 66. There are currently two state pensions available, the basic state pension and the new state pension.

The full basic state pension is currently worth £176.45 per week and is available to:

• Men born before April 6, 1951
• Women born before April 6, 1953.

The full new state pension is currently worth £230.25 per week and is available to:

• Men born on or after April 6, 1951
• Women born on or after April 6, 1953.

To receive any rate of state pension, people must have at least 10 qualifying years on their National Insurance record. The number of qualifying years on this record is used to determine how much state pension a person will receive, but usually, to get the full rate, a person should have at least 35.

When will the state pension age rise next?

According to the Pensions Act 2014, which requires the Government to review the state pension age every six years, the current state pension age for men and women will increase to 67 between 2026 and 2028.

How to check your state pension forecast

People can find out the earliest age they can claim the state pension by using a helpful tool on the Government website.

The tool can help people check a number of key things, such as:

• When they will reach state pension age
• The Pension Credit qualifying age
• When they'll be eligible for free bus travel.

To use the service, people will need to prove their identity using Government Gateway. People can register for Government Gateway if they have not used it before.