Why you shouldn’t rely on the state pension

Go to the government petition site and you will find one with an unusually high number of signatures – 155,288 at the time of writing. It demands that the state “make fair transitional state pension arrangements for 1950s women”. The government has (quite rightly) been attempting to raise the age at which those of us not yet retired get our state pension, and to equalise the ages at which men and women receive their pensions.

So the state pension age for women is to go up to 65 in November 2018, and then to 66 by 2020. That represents an acceleration of the original scheme (it was to go to 65 by 2020) and leaves some women having “to rethink their retirement plans at relatively short notice”, says The Daily Telegraph. Those with a particular grievance are women born in 1953 and 1954, who have seen their state pension age rise by up to 18 months.

However, they aren’t the only ones who will be retiring later than they hoped: the state pension age for men moves to 66 at the same time as it does for women and it will then move to 67 between 2026 and 2028. It’s also worth noting that even those who are in line for getting their state pension earlier aren’t exactly retiring. According to a recent report from Prudential, more than half of this year’s retirees are already working past their state pension age, or are considering doing so. A full quarter have postponed their retirement plans on the basis that they can’t see how they can afford to give up work.

That is something that is unlikely to change in a hurry – there is to be no relief for the women demanding transitional arrangements. The matter was debated in parliament on 1 February (due to the fact that the petition got more than the requisite 100,000 signatures) and the response was pretty firm: “state pension age changes were first made in 1995. All women affected have been directly contacted following the changes. There are no plans to alter state pension age arrangements for this group.”

At the same time there is every chance that the retirement age will be raised further (the Office for Budget Responsibility suggest that it will have to rise to 69 by the late 2040s, and again to 70 by the 2060s). And given the state of the public finances in the UK, there is also a good chance that the value of state pension payments will decline in real (after-inflation) terms over the next few decades as well.

The UK’s state pension is already relatively low compared to those of other developed nations (about 21% of average earnings, against 25% of average earnings in France and 33% in Ireland). In short, it isn’t something to rely on.