The state pension age begins increasing to the age of 66 from 65 today, as analysis by Aegon reveals the proportion of people in receipt of the state pension has dropped in the past 10 years.
Following the completion of the equalisation of the state pension age for men and women last month, millions of people born after 5 December 1953 will see their state pension age rise from tomorrow as a result of state pension age reforms. The move represents the first state pension increase for men since the modern system was introduced post-World War II (1948).
Under plans set in stone by the coalition government in 2011, the state pension age for men and women will gradually increase from 65 to 66 between 6 December 2018 and 6 October 2020.
The increase is being introduced incrementally, meaning people will experience different state pension ages depending on when they were born. For example, anyone born from 6 December 1953 to 5 January 1954 will have a state pension age of 6th March 2019 – meaning some have to wait up to three months longer to start receiving the payment. Those born later will see a larger increase depending on their date of birth. The state pension age is then due to increase to 67 by 2028 and 68 by 2039.
Commenting, AJ Bell senior analyst, Tom Selby, said: “A state pension age increase probably isn’t what most people asked for in their Christmas stocking, but that will be the reality for many people who are about to turn 65. The short-term impact on people’s finances could be significant. At the lower end, a three-month rise in the state pension age could cost someone over £2,000 in retirement income. Those who have to wait a full year longer could miss out on over £8,000 in state pension.”
Furthermore, analysis by Aegon of data from the Department for Work and Pensions (DWP), shows that there has been a decrease in the proportion of the population receiving the state pension in the UK. At May 2018, the proportion of claimants was nearly 2 per cent lower than a decade ago and the total number in receipt of the benefit has fallen every year since May 2015.
These figures come amid the latest population estimates showing the UK population is growing older. The Office for National Statistics (ONS) has estimated that there were just under 12 million people aged 65 and over in 2017, 2.2 million more than 10 years before.
Aegon stated that the downward trend may be due to a number of factors most notably the equalisation of the state pension age. Since 2010, the age at which women can receive the state pension has risen from 60 to 65 in November 2018 and the age for both men and women is set to increase to 66 by 2020.
The analysis also shows that retirement hotspot West Somerset has the highest proportion of state pension claimants in the UK with North Norfolk and East Dorset in second and third position. In May 2018, over a third (34.1 per cent) of the population of West Somerset was in receipt of the state pension, rising from 30.9 per cent in 2008.
At the opposite end of the scale, just one in twenty people in Tower Hamlets receives a state pension. The East London Borough has seen a consistent decrease in the volume of recipients since 2014 whilst experiencing a boom in the population. All of the bottom 10 local authorities by proportion receiving state pension were based within the Greater London region.
Aegon pensions director, Steven Cameron, said: “The analysis highlights there are huge disparities across the UK in the proportions of the population above state pension age. Many rural areas are increasingly becoming ‘retirement hotspots’, while some city regions have over 90 per cent of their population under state pension age. The consequences of this are significant as local authorities face hugely different challenges in providing services for their communities.”
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