State Pension Age increase to 68 deferred.

The government has deferred its decision on when to raise the State Pension Age (SPA) to 68. The important word here is – DEFERRED. It WILL increase to 68, we’re just not quite sure when yet.

So, does your financial planning include the additional year at work, or does it bring in sustainable financial independence at a retirement age to suit you, your family and your lifestyle?

To put it another way, can you stop working for an income, live off private means – savings, investments, pensions etc. – and, afford to wait another 2 or 3 years before your State Pension kicks in?

The saga of changing the SPA to 68 is a reminder that your retirement plans should not be overly reliant on your State Pension.

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Why the deferral.

In the US drama series, The West Wing, the day before the parliamentary recess was referred to as “Take out the Trash Day”. On both sides of the Atlantic, this is an opportunity for the government to publish a flood of announcements, statistics and reports, safe in the knowledge that immediate scrutiny will be limited by the absence of politicians.

We won’t be able to see the wood for the trees.

One of the 17 ministerial statements made on the day before parliament’s last Easter recess, concerned plans to raise the SPA to 68 (it is already planned to rise to 67 between 2026 and 2028). The Department of Work and Pensions (DWP) commissioned an independent review of the subject in December 2021, and an announcement had been expected for some time.

We’re still waiting.

The government published its 40-page review (as well as a 138-page independent review) but did not reach a conclusion on when the SPA would rise. Instead, the Secretary of State for Work and Pensions said the decision would only be made after another review, scheduled to happen “within two years of the next Parliament”.

Retirement Planning

The life expectancy data suggests that the phased approach during 2044–46 should remain but, as the Institute for Fiscal Studies has highlighted, an extra 7 years could cost the government more than £60bn.