If you were born after 1961, you may be facing your worst pension nightmare even though you have years to go before retirement.
The pension plans of millions have received a nasty shock as the government has finally admitted that the state pension may become unworkable as people live and work longer.
A review of the state pension system is underway, with the warning that nothing is off the table – from scrapping the pension to making people work much longer before they can get their retirement nest egg.
The promise is anyone reaching the age of 67 years old by 2028 is safe – their state pension is protected.
Everyone else will have to wait and see how the outcome of the review goes, although The Treasury says the review is nothing for workers to worry about.
Fair pension rules
But the review will consider how much the state pension costs, paying a fair amount to everyone and workers ‘living fuller working lives’.
Fairness is thought to cover issues such as whether someone in a more physically demanding job should qualify for a state pension before an office worker.
Ill-health is another consideration; with the intention some conditions could make the pension payable earlier in life.
The government introduced a law in 2014 calling for a state pension review every five years to look at how longer life expectancy might affect when workers should retire.
The law has a basic ideal that everyone should spend part of their life in retirement drawing the state pension.
Massive cost of state pension
The question is how long and how much as the state pension is becoming an expensive benefit.
By the 2030s, the bill is expected to come to £120 billion a year with more than 15 million pensioners drawing on the cash. Workers will likely have to work into their 70s before they can draw the state pension.
“As our society evolves, it’s right that we look at state pension ages and any relating relevant factors to make sure the benefit is sustainable and affordable for generations in the future,” said Baroness Ros Altmann, the minister for pensions.
The review was put in the diary by the government for 2019, so has started three years early.
