State Pension 

Govt to save £11bn from pension age increase

Govt to save £11bn from pension age increase

The government will save about £11bn a year after 2028 due to the increases in state pension age, according to new research by Aegon.

Analysis from the pensions provider shows about 670,000 people will have to wait longer each year before they can access their state pension, as the age to access these benefits gradually increases.

State pension age has been set at 65 for men since 1925, and was equalised for women earlier this month.

Starting from December 6 2018, and spread over two years, the state pension age will gradually increase for both men and women to 66.

It will increase again to 67 starting in 2028, meaning compared with today, future retirees will have to wait an extra two years for their state pension.

According to data from the Office for National Statistics (ONS), there were 326,933 men and 345,922 women aged 65 in mid-2017.

While the exact numbers vary year on year, this means about 670,000 people celebrate their 65th birthday in any 12 months period, Aegon said.

The full amount of the new state pension is currently £164.35 per week or £8,546 per year. Only those with 35 or more years of national insurance contributions receive this, meaning some will receive less, while others who have entitlements to a previous earnings related state pension may receive more.

But assuming everyone received the full level, if 670,000 people a year miss out on a year’s worth of state pension, that will ‘save’ the government £5.7bn a year, Aegon noted. Over two years, capturing those aged 65 and 66, the total will be £11bn.

Steven Cameron, pensions director at Aegon, said: "While it will be of little consolation to those affected, life expectancies have risen significantly since the state pension age for men was set at 65 and increases to the state pension age are inevitable to keep the state pension affordable, bearing in mind it is paid for out of National Insurance contributions from today’s workers.

"An ageing population also places increased pressure on the NHS and on funding social care, and some of the estimated £11bn ‘saving’ on state pensions may well be needed there."

Mr Cameron is hopeful that these increases won’t come as a shock to savers as they "will have been communicated better than to the Waspi women who saw their state pension age increase by five or more years".

Women Against State Pension Inequality (Waspi), and other campaign groups, claim that while the 1995 Conservative government's Pension Act included plans to increase the women’s state pension age to 65 – the same as men's – the changes were implemented unfairly, with little or no personal notice.

The group also claimed the changes were implemented faster than promised with the 2011 Pension Act and left women with no time to make alternative plans, leading to devastating consequences.

Mr Cameron added: "For those some way off retirement age, it pays to check when you’ll receive your state pension and how much you’ll get.