State Pension  

The impact of the SPA increase

It is clear that the greatest impact of the increased state pension age will be felt by poorer workers, by women, by people in locations with low healthy life expectancies, and generally by those solely – or predominantly – reliant on the state pension.

There will also be an impact on some of the people who use advisers. For people who have their own pension, their adviser will have created plans that include the state pension kicking in at some point.

If this point is delayed, they have to make up a deficit in the region of £8,000 a year until they qualify for the state pension (assuming they still intend to stop work at the same time).

This will reduce the sustainable income rate someone can afford unless this deficit is filled. An individual’s retirement plan may also be impacted by the government’s proposal to increase the age at which one can normally start to take money from a pension pot, from 55 to 57, by 2028. There is talk of setting this age at 10 years below the state pension age on an ongoing basis.

The deferral of the state pension and, potentially, a private pension, will create a hole in retirement plans for those who would like to start drawing their money early. It could mean people are more likely to look into alternative sources of income if they still want to retire early.

Or they are more likely to phase their retirement as they may not be able to afford to give up work completely, but equally not want to delay their retirement. 

Colette Dunn is head of strategy and Marie-Lise Tassoni is a consultant at Milliman