Middle-aged workers could lose as much as £17,300 each if the state pension age rise to 68 is brought forward by seven years, according to experts at Fidelity International.
A new report from the Office for Budget Responsibility (OBR) indicates that the state pension age will need to rise to 68 in 2037, rather than 2044 as currently planned. This change, if implemented, would mean millions of people currently in their 50s would have to work an extra year before becoming eligible for their state pension.
Impact of the Proposed Change
Under the Pension Act 2007, the state pension age is scheduled to rise from 67 to 68 between 2044 and 2046. However, the OBR report suggests this transition could begin as early as 2037, affecting roughly five million people aged 49 to 55.
Jemma Slingo, a pensions and investment specialist at Fidelity International, explained the significant financial consequences: “The state pension age is rising – and it could rise faster than people expected. Currently, the state pension age will begin to rise from 67 to 68 in 2044. However, a report from the Office for Budget Responsibility suggests the change could take place sooner: between 2037 and 2039.”
She added: “This has big implications for a cohort of people currently in their early to mid-fifties, who may have to wait longer to receive government support. Imagine you recently turned 53, for example. Under the current timetable, you would receive your state pension at age 67, in 2040. If the rules change, however, you could be waiting until you’re 68.”
Financial Losses Due to Triple Lock
The potential loss is driven by the triple lock, which guarantees the state pension increases by the highest of inflation, wages, or 2.5% each year. According to Fidelity, the full new state pension currently pays £12,548 a year. By 2037, under triple lock protection, it could be worth at least £16,464, and by 2040, it could rise to £17,730.
Slingo noted: “This could have significant financial consequences. The full new state pension currently pays £12,548 a year. However, it is triple lock protected, meaning it increases every year by the highest of either inflation, wages or 2.5%. In 2037, therefore, it will be worth significantly more: at least £16,464, if the triple lock stays in place. By 2040, it could be worth £17,730.”
Not all affected Britons would lose a full year, as some would fall within a transition period where the rise is introduced gradually, similar to the current increase from 66 to 67, which delays eligibility by up to 11 months across a two-year period from 2026 to 2028.
Advice for Middle-Aged Workers
Ms Slingo urged affected workers to start planning now to mitigate the impact. She recommended prioritizing private pensions, maximizing employer contributions, and checking National Insurance records to ensure full state pension entitlement.
“If you’re keen to retire before you hit state pension age, you need to do some careful planning. A sensible first step is to prioritise your private pension. Starting young gives your investments more time to benefit from compound growth, but pensions can also be incredibly tax-efficient later in life too, thanks to generous tax relief,” she said.
She also advised: “If you're in a workplace pension, check whether you are adding enough every month to receive the maximum contribution from your employer. Some employers will match your contributions up to a certain level, for example. Failing to do this could mean missing out on what is effectively free money.”
Regarding National Insurance, she added: “You can check your NI record on the government website and, if there are gaps, you can top up your state pension by making voluntary contributions for the past six years. You can do this before or after you reach state pension age. The point of this is to pay a small amount now, so you get more income in the long run.”
