Denmark Boosts Retirement Age to 70 Years: Might the UK Elevate State Pension Age as Well?
Rising Retirement Age: A Possible Scenario for the UK
Amid growing debate around the UK's state pension system, speculations are rife about potential changes, including an increase in the retirement age, paralleling Denmark's recent decision to raise its retirement age to 70 by 2040.
As of now, the state pension age in the UK stands at 66 for both men and women, with plans to increase it to 67 between 2026 and 2028. According to current plans, the retirement age is scheduled to hit 68 in the mid-2040s, affecting those born between April 1977 and beyond.
However, the next significant rise to 68 is under review, and experts suggest that the UK government might expedite this increase. The last two reviews in 2017 and 2023 recommended advancing the move to 68, but these suggestions were ignored. The next review is due in spring 2029, but there are concerns that it may be disregarded much like its predecessors.
Elevating the retirement age is expected to remain a hot political topic due to concerns about financial implications, as money experts have warned. The Danish decision has sparked discussion about whether a similar shift could occur in the UK.
Meanwhile, it's worth noting that the minimum pension age for accessing private retirement savings will ascend from 55 to 57 from April 2028. Historically, governments have tended to keep the state pension and private pension ages roughly 10 years apart, suggesting that any future increases in the UK could happen in tandem.
Denmark's Pension Overhaul
Denmark ties its retirement age to life expectancy, and revises it every five years. With the current retirement age at 67, it is set to rise to 68 in 2030 and to 69 in 2035. Last week, an overwhelming majority in the Danish parliament voted to further increase the retirement age to 70 in 2040, affecting Danes born from December 31, 1970, onwards.
A Plan Under Scrutiny
Steve Webb, former Pensions Minister and This is Money's retirement columnist, notes that pension ages have been on the rise in developed countries in response to increasing life expectancies and declining birth rates. He mentions that the UK faces significant challenges in meeting the state pension, NHS, and care costs for an aging population.
Regarding the politics of raising the retirement age, he adds that the current policy is to provide at least a ten-year notice of changes. However, he questions whether any future increases would generate additional revenue for at least two parliaments without prompting negative publicity.
Webb suggests that the next review, due during this parliament, might lead to no change in the legal timetable for increases in the state pension age.
Informed Planning is Key
With future increases in the state pension age a possibility, experts advise people to stay informed about their personal pension ages. Tom Selby, director of public policy at AJ Bell, points out that each government must review the state pension age during their term in parliament.
Despite the uncertainty, Selby indicates that government's are not obliged to accept the recommendations of the review, and any further increases in the state pension age are likely to be gradual and in the distant future. He encourages people to check their pension ages and use the information to plan ahead.
[1] Source: The Telegraph, BBC News, This is Money
[2] Source: The Guardian, Bloomberg
- Rising retirement ages may not only be a scenario for the UK, considering Denmark's recent decision to raise its retirement age to 70 by 2040.
- Politics play a significant role in the discussion about elevating the UK's retirement age, with concerns about meeting the state pension, NHS, and care costs for an aging population.
- Personal-finance experts suggest that people should stay informed about their personal pension ages, as any future increases in the state pension age are likely to be gradual and in the distant future.
- Investing in pensions is crucial for individuals, given the potential changes in the state pension system and the increasing retirement age.
- Aging comes with a series of medical-conditions and health-and-wellness concerns, including the need for long-term care, which contribute to the financial burden on both governments and individuals.
- The ongoing debate around pensions is closely tied to broader economic matters, such as finance, business, and even general-news, as it directly affects the lives and savings of millions of people in the UK.
