The Department for Work and Pensions (DWP) is raising the state pension age from 66 to 67, with significant implications for people born between August 6 and September 5. These individuals will face a longer wait before receiving their state pension, with some approaching 67 by the time they become eligible.
What's changing and who is affected
Under previous rules, you could claim your state pension once you turned 66. However, the age increase means that people in this birth window will now have to wait longer. Specifically, those born between September 6, 1960 and October 5, 1960 will reach state pension age at 66 years and 6 months. The gradual increase will continue until the state pension age reaches 67.
This change is part of a broader government policy to adjust the state pension age in line with increasing life expectancy. The DWP has confirmed that the increase from 66 to 67 will be phased in over several years, affecting different birth cohorts at different times.
Impact on employment and income
Research from the Institute for Fiscal Studies (IFS) highlights the real-world consequences of such increases. According to the IFS, previous increases in the state pension age have led to a rise in employment rates among affected age groups by about 10 percentage points. This is driven primarily by people staying in their existing jobs longer, rather than moving to new roles or re-entering the workforce.
However, the IFS also notes that only a minority of those affected choose to work longer. This means the direct loss of income from waiting for the state pension is only partially offset. The IFS states: "Previous increases in the State Pension age (SPA) have been shown to cause some people to delay retirement and stay in paid work for longer."
Poverty risk and household incomes
The financial impact can be severe. The IFS points out that average incomes are markedly lower among affected individuals because they have to wait longer for their state pension. Lower household incomes also lead to an increase in income poverty. For example, when the state pension age was increased from 65 to 66, the income poverty rate of 65-year-olds rose from 10% to 24%, with the effects concentrated among those who were out of paid work.
This is a stark warning for those born in the affected window. The delay in receiving the state pension could push some into poverty, especially if they are unable to continue working due to health issues or lack of job opportunities.
Government response and future plans
Former Work and Pensions Secretary Liz Kendall acknowledged the challenges facing retirees. She said: "People deserve to know that they will have a decent income in retirement – with all the security, dignity and freedom that brings. But the truth is, that is not the reality facing many people, especially if you’re low paid, or self-employed."
Kendall also mentioned the revival of the Pensions Commission, which was originally set up to address barriers to saving. She added: "The Pensions Commission laid the groundwork, and now, two decades later, we are reviving it to tackle the barriers that stop too many saving in the first place."
What should you do if you're affected?
If you were born between August 6 and September 5, it's crucial to check your exact state pension age using the DWP's online calculator. You may need to plan for a longer period before receiving your state pension, which could involve increasing your private pension contributions or planning to work longer.
For those born between September 6 and October 5, 1960, your state pension age will be 66 years and 6 months, so you'll need to factor that into your retirement plans. The DWP advises everyone to check their state pension forecast to understand their entitlement and plan accordingly.
Conclusion
The state pension age increase to 67 is a significant change that will affect many people. While some may benefit from staying in work longer, others could face financial hardship. It's essential to stay informed and take proactive steps to secure your retirement income. The government's revival of the Pensions Commission may bring further changes, but for now, those affected should review their financial plans.
