Date: 24 June 2010
In this week’s emergency budget, the new government announced that it will review the age from which you can claim your state pension.
The government’s intention is to help cut the
deficit by bringing forward the rise in state pension age so that
it rises to 66 for men by 2016
and 66 for women by 2020.
The previous government’s plan had been to
raise state pension age to 66 for men and women by 2024.
At Usdaw’s National Pensions Conference in
Warrington on 9 June, General Secretary John Hannett spoke about
the new government’s proposal to speed up the rise in state pension
“People living in the more deprived areas of
the country – where improvements in life expectancy trail behind
the rest of the country – will be unfairly disadvantaged.”
“It also means that someone who is 60
today – who has already put plans in place for
their impending retirement – will suddenly and unexpectedly face
the prospect of having to work for an extra year longer before they
can claim their state pension – this isn’t the right thing to
Elsewhere in the budget, changes to the way
the Basic State Pension increases every year were also
announced. From April 2011, the Basic State Pension will
increase by whichever is the highest of the following three:
- the rise in the Consumer Price Index (CPI), or
- the rise in National Average Earnings (NAE), or
Key benefits for older people, including
Winter Fuel Payments, free off-peak local bus travel, eye tests and
prescriptions for those aged over the female State Pension Age, and
free television licences for those aged over 75 are all to be
The government will also consult on phasing
out the Default Retirement Age – that’s the age at which your
employer can dismiss you. The previous government already
held a consultation on this earlier this year. It’s expected
that the Default Retirement Age will definitely go – but how soon
and how quickly we don’t know.
The current rule that says you have to convert
your pension savings into a pension annuity no later than your
75th birthday is to go. The idea is to enable
individuals to make more flexible use of their pension savings but
in truth most people will have annuitized their pension savings
well before age 75.
Finally, the government will stick to plans to
restrict the tax relief that high earners receive on their pension
savings but are going to look into achieving it by reducing the
The annual allowance is the amount of pension
benefits you can build up in a year and receive tax relief.
At the moment the annual allowance is £255,000. The
government may reduce it as low as £35,000.