The Government issued the update of November 18(Image: Getty Images)
The Government has issued an update on changing the State Pension age following calls to increase it in line with “the latest life expectancy projections”. The State Pension age is currently 66 for both men and women.
This is expected to increase to age 67 between 2026 and 2028, and then to 68 between 2044 and 2046. Your State Pension age is the earliest you can start receiving your State Pension. It may be different to the age you can get a workplace or personal pension.
The State Pension age is regularly reviewed – you can check when you’ll reach State Pension age, your Pension Credit qualifying age and when you’ll be eligible for free bus travel online at Gov.uk. In a recent written question asked to the Commons by Ann Davies said: “To ask the Secretary of State for Work and Pensions, what plans he has to review the criteria used to determine the State Pension age to reflect regional inequalities in healthy life expectancy.”
Parliamentary Under-Secretary of State for Pensions Torsten Bell replied, saying that the Government is currently undertaking a review of the State Pension age, which will take into consideration longer life expectancy predictions by the ONS.
He said: “The Government launched the third Government Review of State Pension age on 21 July. This Review will consider a wide range of evidence including the latest ONS life expectancy and healthy life expectancy projections, findings from the Government Actuary on adult life in retirement, and an independent report led by Dr Suzy Morrissey, which will consider which facts are most relevant in setting State Pension age.”
It comes after the exact amount that the State Pension is set to rise by next year has been confirmed following the release of the latest inflation data by the Office for National Statistics. UK inflation remained unchanged at 3.8% in September – despite the majority of economists and the Bank of England having expected inflation to rise to 4%.
The inflation figure for September is particularly important, as it is normally used to help calculate how much the State Pension and many welfare benefits will rise by next April. The triple lock ensures the State Pension increases every April in line with whichever is the highest of earnings growth between May and July, inflation in September, or 2.5%.
Wage growth for May to July was 4.8% and as this is higher than September inflation, this is the figure that will be used to increase the State Pension by next year. The Government also recently responded to calls to introduce a Pension Tax Lock to “help ensure retirement savings are protected and people can save with confidence.”
A petition online calling on Labour to not reduce the amount people can withdraw from their pension tax-free or the amount of tax relief given on pension contributions has reached almost 20,000 signatures – prompting a response from the Government. If it reaches 100,000 it will be considered for debate in Parliament.
The HM Treasury says that “the Government does not comment on proposed tax changes or tax related speculation ahead of Budgets.” Chancellor of the Exchequer Rachel Reeves is set to announce the Autumn Budget on November 26.
It said: “The Government is committed to ensuring pensioners have security in retirement and has launched a Pensions Commission to look at what is required to ensure the system is strong, fair and sustainable.
“The Government wishes to encourage pension saving, to help ensure that people have an income, or funds on which they can draw on, throughout retirement. The Government is committed to supporting savers at all stages of life. That is why, for the majority of savers, pension contributions made from income during working life are tax-free.
“This is known as ‘pensions tax relief’. This relief is available at an individual’s marginal rate. For example, contributions from a basic rate (20 per cent) taxpayer who contributes to a registered pension scheme in 2025/26 receives tax relief at 20 per cent. This makes pensions tax relief one of the most expensive reliefs in the personal tax system, costing £78 billion in 2023/24.
“Investment growth of assets in a pension scheme is also not subject to tax. From age 55 (or when scheme rules allow a pension to be taken), up to 25 per cent of the pension can be taken tax-free (capped for most at a maximum of £268,275), depending on scheme rules. Pension income received (for example as a regular annuity payment or as income drawn down from a pension) is subject to income tax at an individual’s marginal rate, to reflect the fact that pensions in payment are a form of deferred income and have not been previously taxed.
“With regard to the proposed ‘pension tax lock’, the Government does not comment on proposed tax changes or tax-related speculation ahead of Budgets.
“The Government recognises the importance of promoting confidence in pension saving and is committed to ensuring future generations of pensioners have security in retirement. This is why the government announced a landmark two-phased review of the pensions system days after coming into office.
“The first phase, the Pensions Investment Review, focused on reforming the pensions landscape to boost savers’ pension pots. These reforms will be delivered through the Pension Schemes Bill.
“The Pensions Commission will build on these foundations and make recommendations to the government on the broader questions of adequacy, fairness, and sustainability to guide the long-term future of our pensions system. The Pensions Commission will be undertaken by Baroness Jeannie Drake, Sir Ian Cheshire and Professor Nick Pearce.
“More information on the Pensions Commission, including its Terms of Reference, is available here: https://www.gov.uk/government/publications/pensions-commission-terms-of-reference“