Pension crisis - what it means to you
21 October 2011
Pensions are the talk of the town at the moment and seem to be leaving many people's heads in a bit of a pickle. With the government moving back and forth on their decisions, we thought we'd try and set the record straight about State Pension in the UK and what it could mean to you.
What is a State Pension?
The State Pension is a regular payment people can receive when they reach the State Pension age. This is a regular income that you receive for the rest of your life.
How much is my State Pension?
The State Pension is made up of two parts, the basic State Pension and the additional State Pension.
The State Pension is based upon how much you have contributed to National Insurance over the years. In 2011-2012, a single person can get up to £102.15 a week. Some do get less than this, while others will receive more because they also receive an additional State Pension. Recently, an inflation-matching rise in State Pensions has been announced.
What age can I start to claim my State Pension?
Currently, the State Pension age for men is 65. For women it is 60 years and nine months. By November 2018 the State Pension age for women is set to increase from 60 to 65 to match that of the men.
At present, further changes are being made to the Pensions Bill, which is on its way through Parliament for full approval. It is this Bill that the government is working on in order to slow down the State Pension age increase, which has caused a bit of an uproar over the last few months, to say the least.
What amendments are being made to the Pensions Bill?
Amendments include the State Pension age rising to 66 by October 2020 instead of April 2020 for both men and women.
Following on from the recent protests over the State Pension age, the government were forced to review their position and make further amendments to the Pensions Bill. This change saw the government cap the waiting time for women to receive their State Pension from 24 months to 18 months.
Reacting to the country's uproar, Work and Pensions Secretary Iain Duncan Smith said to the Daily Mail, "We have listened to the concerns of those women most affected by the proposed rise in State Pension age to 66 and so we will cap the increase to a maximum of 18 months."
What was the problem and how will the new changes affect women?
If the State Pension age had not changed from April 2020 to October 2020 as many as 2.6 million women would've had to wait longer for their State Pension. Of those 2.6 million, 500,000 would've had to wait one year longer than planned with a further 33,000 waiting for two years - the worst-hit of the bunch.
These new amendments to the Pensions Bill will greatly benefit 245,000 women born between December 1953 and September 1954. This delay will also apply to men and will cost a total of £1.1 billion.
Date of birth Date State Pension age reached
6 April 1953 to 5 May 1953 6 July 2016
6 May 1953 to 5 June 1953 6 November 2016
6 June 1953 to 5 July 1953 6 March 2017
6 July 1953 to 5 August 1953 6 July 2017
6 August 1953 to 5 September 1953 6 November 2017
6 September 1953 to 5 October 1953 6 March 2018
6 October 1953 to 5 November 1953 6 July 2018
6 November 1953 to 5 December 1953 6 November 2018
The Department of Work and Pensions table below shows the State Pension age for women up to age 65.
ï»¿ï»¿Joanne Segars, chief executive of the National Association of Pension Funds, said to the Daily Mail, "A quarter of a million women who were set to wait up to two years longer for their pension will now see that wait capped at 18 months.
"This is a useful bit of leeway. People need time to prepare their finances for the transition into retirement, and there's now a clearer ceiling on what to expect."
However, despite the amendments to the State Pension age, women are now having to face a six year leap in a decade, while men's retirement age rises only by a year over the same time frame. This leaves many women in a vulnerable position when it comes to planning their retirement.
Ruth Sunderland of the Daily Mail, said, "Offering six months' grace is a token gesture. It shows that the Government has listened to the thousands of angry and anxious middle-aged women who protested, but not hard enough."
What are your plans for retirement? Have you considered your financial future and how you are going to fund your retirement years? By speaking to Key we can give you expert advice on equity release as well as information on boosting your pension income through our annuity service.
Why not start by using our free pensions calculator? or, if you are considering equity release as your next financial move, use our free equity release calculator to find out how much you could release from your home.
Key's typical fee for releasing cash is 1.65% of the amount released, payable only on completion of the plan.
This is an equity release plan. To understand the features and risks, ask for a personalised illustration.