Advisers have called the Government’s proposal to bring forward the increase in state pension age the “tip of the iceberg”, as they predict more changes in the future.
The Government proposed a new timetable yesterday for an increase to the state pension age from 67 to 68 between 2037 and 2039. This is earlier than the current legislation which sees a rise between 2044 and 2046.
The new timetable is in line with what was set out in John Cridland’s state pension review in March.
Combined Financial Strategies chartered financial planner Jonothan McColgan is surprised by the timing of the proposal.
He says: “I’m surprised the Government has the courage to do this. They can see the writing on the wall that retirement age was going to increase, and that retirement benefits in the future will be less because the triple lock will come under increasing threat. These things were to be expected but it is a bit of surprise it has happened now with such a weak Government.”
McColgan adds: “We need people to take more responsibility for their old age but we have also got a situation where the Government is encouraging people to spend to keep the economy going. Those are contradictory.”
Aspect 8 financial planner Claire Walsh predicts the next step could be the introduction of means testing for the state pension.
She says: “Earlier in the week, research said life expectancy is tapering off but we have still got this black hole deficit so it is inevitable the Government will be making changes with this.”
Informed Choice managing director Martin Bamford adds: “It is probably the tip of the iceberg when it comes to state pension changes because we are all living longer and it is becoming increasingly unaffordable to maintain the state pension age or the level of the state pension in the future.”
Advisers say their clients are unlikely to be impacted by the change.
Bamford says: “In the main the clients we work with tend to be closer to state pension age now so it will be less relevant to them. We encourage people not to rely on state pension as a source of income unless they are very close to receiving it because we have already seen the Government move the goalposts in the past.”
McColgan says most of his clients are over the age of 50 and are in a position where the state pension is a bonus, not a necessity. However, he says that is not the case for the majority.
He adds: “It will affect people who are unlikely to seek advice because they are the people who are purely reliant on the state pension for their retirement. That is where this is a tough decision.”
Cavendish Ware associate director Roy McLoughlin says: “While not ignoring the state pension, we are saying to people please do not rely on it. When we are doing projections on people’s pensions and what they will be worth you get a general reluctance that people will not be able to touch their pension for a perceived longer time than they will.
“Anybody that was relying on solely on the state pension is in for a big shock.”