It has been announced MPs have voted to increase womenís state pension age to 66 years old by 2020. Find out what this means for you and your pension.
Under the new plans 50,000 women will have to wait for more than a year longer than anticipated before receiving the state pension ñ affecting many women aged between 56 and 57 years old, a Labour Party statement showed.
A further 33,000 women as a result will have to wait an extra two years before they will be able to receive their state pension.
It was calculated that 33,000 women born between 6th March 1954 and 5th April 1954 are set to lose at least £10,000 in lost state pensions, and as this measure has come so late in their lives there is the worry many will struggle to be able to accommodate this with extra savings.
“I’ve always agreed that the state pension needs to rise as people live longer, but these proposals unfairly hit women. There is strong and vocal opposition to these unfair pension changes across the UK,î said Rachel Reeves MP, Labour’s Shadow Pensions Minister.
“You’ve got to deal with the reality of the situation. If we don’t change anything the system is completely unaffordable,î David Cameronís spokesman said, as reported by Sky News.
What this means for you
The problem many women may find is that they now only have seven years to bridge the gap they were depending on a state pension to accommodate for.
- Defined Benefit. Those who are in the strong position of being eligible for a defined benefit pension should be able to accommodate this change as they will receive a good pension which is usually based on their average earnings over their working life time.
- Defined Contributions. Women who are depending on a defined contribution pension could try to up the percentage they contribute to this each month.
- Equity ISA. Or you could look at other saving options such as equity ISAs, so you can build up a pot of money you can lean to when you may need it to support your pension when you come to retire.
This change also comes at a time when the default pension age is to be phased out ñ so companies will no longer have the power to force employees to retire when they reach retirement age. So if an employeeís pension is insufficient to support them when they reach retirement age, they will be able to carry on working.
So another option is to continue working until you have acquired a suitable pension or savings pot. The Default Retirement Age is being scrapped in October this year.