Now you see it, now you don’t: The future of state pensions ❌ 👀
Here’s a shocker: if you’re under 40, you probably won’t receive your state pension until you’re at least 70 years old (if not later). At present, the British government is spending around £108 billion on pensions - a hefty 42% of the entire welfare budget. As the population ages, the government will inevitably need to spend more on state pensions and thus, the retirement age will continue to rise. We don’t know about you, but we don’t really fancy working full-time at the grand ole’ age of 70.
Not to be alarmist, but it’s important you get to grips with state pensions today in order to plan ahead with confidence. We’ve done the heavy lifting for you, and this is how the situation is shaping up to look like:
- A new flat-rate, or single-tier, state pension has come into effect for everyone retiring after 6 April, 2016. In essence, this means that if you retired before 6 April 2016, you will continue to receive your basic state pension. Before these changes were introduced, the age at which you could claim state pension was 65 for men, and 60 for women. If you qualified, the maximum basic state pension rate you could receive was £119.30 per week.
- The age at which you can claim the state pension is set to rise to 65 for both sexes by 2018; 66 by 2020 and 67 by 2028. You get the drift - the more time passes, the older you’ll need to be to claim your state pension. The maximum you can receive from the new state pension is £155 per week, or £8,060 a year. To qualify for any pension at all you will need to have 10 years of National Insurance contributions. To qualify for the full new state pension, you will need to have 35 qualifying years. Previously this was 30 years.
- The Department for Work and Pensions’ projections suggest that workers under the age of 30 may not be entitled to a state pension until the ripe age of 70.
Speaking of old age, have you ever wondered how the dramatic increase in life expectancy will affect how we plan and live our lives? "The 100-Year Life: Living and Working in an Age of Longevity” by Andrew Scott and Lynda Gratton explores this phenomenon. The authors claim that the traditional, three-stage linear life we’ve grown so used to - education, career and retirement - will be replaced by a multi-stage life with new stages. Fight it all you want, but the reshaping of life in response to our longevity is inevitable, and we need to adjust our skills to financially plan our prolonged future.
👉 Have you given retirement much though? When and how do you think you’ll retire? Looking at how much state pensions will give you, do you think you could have a fulfilled life on it alone? Looking forward to hearing your thoughts! 👈
Credit image: Giphy.