State pension: the bad news begins...
The rules on when you can claim kick in now, and it’s expected to increase poverty, says Paul Lewis.
If you were born in the nineteen sixties, your state pension age is beginning to rise from 66 to 67. The first people affected were born 66 years ago between 6 April and 5 May 1960. Their state pension age is now 66 years 1 month, which will fall in May or June. Those born 6 May to 5 June 1960 will have to wait until they are 66 years 2 months old, and so on until people born 6 February to 5 March 1961 will reach state pension age at 66 and 11 months and those born 6 March 1961 or later will have to wait until their 67th birthday. You can find your exact state pension age at gov.uk - search “state pension age”.
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Accessing Your Pension Savings - Make sure your pension works as hard as you have.
This change seems to have taken a lot of people by surprise even though it was announced in November 2011 by Conservative Chancellor George Osborne. The Department for Work and Pensions has been sending letters to those affected. It will save the Treasury £10.5 billion a year, in other words it will pay less to people who otherwise would have been entitled at 66. The change will cost each person affected around £1000 in lost pension for each month’s delay. Anyone not entitled until they are 67 will have lost around £13,000 for a year’s lost state pension. The Institute for Fiscal Studies expects the change to increase poverty among 66-year-olds, as happened when pension age was raised from 65.
People aged 66 who work will now continue to pay National Insurance Contributions (NICs) for longer as they only stop at state pension age or, for self-employed people, the following tax year.
Other benefits that pensioners may be entitled to will also be delayed until individuals reach state pension age. They include winter fuel payment, attendance allowance, pension credit, and the higher amounts for low-income pensioners given by local councils towards council tax or rent.
- Get our free guide to equity release written by Paul Lewis
Accessing Your Pension Savings - Make sure your pension works as hard as you have.
The next rise – to 68 – is scheduled for 2044, affecting people born 6 April 1977 or later. But a review into state pension age, expected later this year, may bring that date forward. Company pensions are usually still paid at 65 though some may follow state pension age.