Millions of hard-working Britons aged between 49 and 55 have been hit with a stark warning that they could lose out on a staggering £12,500 due to a major state pension shake-up. Under current legislation, the state pension age is scheduled to rise to 67 by April 2028, then gradually increase to 68 between 2044 and 2046.
However, bombshell reports reveal the Treasury has indicated to the Office for Budget Responsibility (OBR) that it wants to aggressively fast-track the rise to 68, potentially dragging it forward to 2037. This drastic policy acceleration would mean that approximately five million workers currently in their early 50s would be forced to toil for an extra year before they could pocket a penny of their state pension.
A single year’s delay will deal a devastating £12,500 blow to workers. This is because the full new state pension is now worth £241.30 a week – or £12,547.60 a year – meaning affected savers lose a full year of payouts.
The state pension age has been under official review, with ministers scrutinising whether the increase should happen much earlier than originally planned. While a Treasury spokesperson insisted that “no decision has been made” and that they “cannot pre-empt the outcome” of the ongoing review, experts are urging mid-lifers to take immediate action to protect their financial future.
Compounding the problem, the full rate of the new state pension will soon breach the personal income tax threshold, which remains frozen at £12,570 until 2030, dragging more unsuspecting retirees who also receive a private pension into the taxman’s clutches.
Finance experts have urged workers to act now to protect their retirement.
Brian Byrnes, director of personal finance at Moneybox, noted that those aged 49 to 55 are in their peak earning years and advised that increasing contributions by just 1% or 2% can make a massive difference. Savers should also hunt down forgotten cash using the Government’s free pension tracing service to find and consolidate old workplace pots.
Savers must also exploit tax relief and free employer cash. Every pound you save gets a Government boost – a basic-rate taxpayer only pays £80 to get £100 in their pot. You should also maximise workplace auto-enrolment by taking advantage of employer “matching” schemes, where your company matches any extra contributions you make with free money.
Finally, it pays to review your investments and your career longevity. Claire Trott, head of advice at St James’s Place, has warned against leaving pensions in the default fund, as switching to options tailored to specific goals can drastically boost the final pot. Meanwhile, former pensions minister Steve Webb has suggested a late-career pivot, advising those in physically demanding roles to retrain for less strenuous jobs to protect their health and comfortably earn for longer.
The cost of finishing work is soaring. According to the Pensions UK Retirement Living Standards, a single person now needs £45,400 a year for a comfortable retirement – which includes foreign holidays and eating out – while a couple requires a combined £67,200 annually.
