A proposed DWP move could hit those born between 1971 and 1973 the hardest
Millions of workers in their early 50s are facing a potential state pension bombshell – with experts warning they could miss out on more than £17,000 if the Government brings forward its plan to raise the retirement age. The Department for Work and Pensions is reviewing whether to accelerate the increase in the state pension age from 67 to 68, a move that could hit those born between 1971 and 1973 hardest.
According to new calculations by Rathbones, one of the UK’s leading wealth managers, those affected would lose a full year’s worth of state pension – worth up to £17,774 – if the changes come in just five years earlier than currently planned. The current law says the pension age will rise to 67 by April 2028 and to 68 between 2044 and 2046. But the Government’s new review – due to report in 2029 – could bring that increase forward to as early as 2039.
If that happens, those aged 51 to 53 today could be among the first to miss out. The losses would range from £15,798 to £17,774 depending on the future rate of state pension increases. The figures, based on either a 2% inflation-linked increase or the so-called triple lock – which guarantees the state pension rises by the highest of earnings, inflation or 2.5% – are shown below:
Current age
Years until 67
1-Year state pension delay loss if uprated by 2% inflation target
1-Year state pension delay loss if triple lock is maintained (2.5% a year increase)
53
14
£15,798
£16,918
52
15
£16,114
£17,340
51
16
£16,436
£17,774
Rebecca Williams, Divisional Lead of Financial Planning at Rathbones, warned: “With longevity increasing and population pressures mounting, future generations appear set to face a less generous state pension regime than that enjoyed by many of today’s retirees. The situation appears particularly precarious for those in their early 50s who face real prospect of missing out.
“We’ve seen a number of people in their late 40s and early 50s come to us seeking greater clarity on their retirement prospects. With shifting goalposts in the pension landscape, many are understandably keen to ensure they’re on track to retire comfortably and on their own terms.
“The state pension alone is not enough for a comfortable retirement. People need a broad foundation built on workplace pensions, private savings, and the ongoing support of pension tax relief. Cracks are beginning to show in the system, and they must be addressed urgently if we are to maintain faith in the UK’s pension framework and ensure people are equipped not just to survive, but to thrive in later life.”
The warning comes as the DWP revives the Pensions Commission, nearly 20 years after it first reported, to tackle the growing challenge of pensions inadequacy.
Charlotte Kennedy, Chartered Financial Planner at Rathbones, added: “With pension arrangements offering a guaranteed income for life going the way of the dodo, the onus is increasingly on people to accumulate a nest egg that enables them not just to survive, but to thrive in retirement – with sufficient resources set aside to cover the cost of care.
“While auto-enrolment has helped many build retirement savings with minimal friction, most savers remain far behind what is needed for a comfortable retirement. Efforts to bolster pension adequacy are welcome, but it’s important that new measures address the complex barriers preventing people from saving enough.
“The self-employed must not be left out. For business owners, pensions often take a back seat to the demands of growing a business. Financial education is also essential. It remains a minor part of the curriculum, typically folded into maths or PSHE. This must change.
“The earlier young people learn how pensions work, the more likely they are to start saving early and feel empowered to make informed financial decisions.”
The triple lock – introduced in 2010 – has been credited with boosting the incomes of many pensioners. But with the Institute for Fiscal Studies warning it could cost £40 billion a year by 2050, its future is far from certain.
Campaigners say that if changes must be made to the pension age or pension generosity, the Government must provide clear, early warning – and not repeat the chaos that led to the WASPI scandal, which left thousands of women scrambling to adjust to a later retirement with little notice.
