New Age Restrictions for State Pension might delay Retirement
The State Pension Age in the UK has been changing over the years. As of July 6, 2020, the State Pension Age for those born between August 6, 1954, and September 5, 1974, has increased from 65 to 66 years.
Retirement is one of the most critical time of an individual’s life. It is the time when they stop working, and the regular flow of income ceases. Therefore, you need to plan your retirement efficiently so that you can enjoy a comfortable lifestyle, even post-retirement. Retirement planning includes creating a retirement budget and start saving in pension schemes and other avenues to ensure financial stability.
The government of UK ensures the financial safety of its citizens through the State Pension scheme. The UK citizens start receiving their State Pension at the predefined State Pension Age. The State Pension Age has undergone several changes in the past decade to keep the pension age and pension amount reasonable and in line with the life expectancy. The age was fixed at 60 years when the Pensions Act was passed in 1995; however, it has risen to 65 and expected to undergo a few more changes in the near future.
The new State Pension Age amendments are delaying the retirement for most of the individuals. For both men and women born after April 6, 1978, the State Pension Age is 68 years, while for those born earlier, it is progressing from 65 to 66 years in phases based on their date of birth. According to the new amendment that became effective on July 6, 2020, the State Pension Age for those born between August 6, 1954, and September 5, 1954, has gone up from 65 years to 66 years. Under the government plans, the phased increment in the retirement age will be completed in October 2020, with one more change expected in September 2020 for the next batch of age.
It is important to note that men born before April 6, 1951, and women born before April 6, 1953, are eligible for the Basic State Pension, while those born on or after the mentioned dates fall under the New State Pension Plan.
The basic State Pension pays a maximum of £134.25 per week, whereas the full new State Pension per week is £175.20. The State Pension depends on the National Insurance (NI) records of the individuals. You need to have at least 30 years of NI contributions to become eligible for the full basic State Pension and at least ten qualifying years on the NI record to get the new State Pension. Both the basic and new State Pensions are usually paid every four weeks in arrears and the day of payment varies with the last two digits of the National Insurance number. It is essential to know that your State Pension payments can increase by deferring it. The basic State Pension grows by 1% for every five weeks it is delayed for.
Thus, the ongoing changes in the State Pension age affect the time at which the individuals start receiving their State Pension. However, the retirement age is not synonymous with the State Pension age. You may continue working beyond your State Pension age or stop working before reaching the designated age. Still, you will become eligible for receiving the State Pension only at the predefined age based on your date of birth.
The State Pension age in the UK has undergone several changes, with a few changes in line for the future. It is vital for the people working in the UK to know their eligibility, the State Pension age, and State Pension amount to plan their retirement efficiently and remain financially secure.