The state pension age rose yesterday for millions of people, potentially costing them thousands of pounds.
Under plans set out by the coalition government in 2011, people born after 5 December 1953 saw their state pension age rise yesterday as part of reforms designed to cut billions from the UK’s welfare bill.
The state pension age for men and women will gradually increase from 65 to 66 from now until 6 October 2020.
The state pension age is then due to increase to 67 by 2028 and 68 by 2039.
It is the first state pension increase for men since the modern system was introduced in 1948.
As the increase is being introduced incrementally, people will experience different state pension ages depending on when they were born.
Anyone born from 6 December 1953 to 5 January 1954 will have a state pension age of 6 March 2019 – meaning that some people 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.
This means that a three-month rise in the state pension age could cost someone more than £2,000 in retirement income, while those who have to wait a full year longer could miss out on more than £8,000 in state pension.
AJ Bell warns that the changes could have a “significant” impact of people’s finances.
Tom Selby, senior analyst at AJ Bell, says: “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.
“While this might feel like a cruel lottery for those immediately affected, younger generations will need to prepare for rises in the state pension age to 67 and 68. Indeed, if life expectancy continues its long-term trend upwards, a state pension age of 70 could well be on the cards."
He adds: “For most savers – and particularly younger people – the clear signal coming from the state is that if you want security in retirement, you need to provide it for yourself.”
The government is also planning further increases, which will raise the state pension age from 66 to 67 between 2026 and 2028.
However, millions of people are still confused by the new rules.
According to YouGov research for charity Age UK, one in four people aged between 50 to 64 don’t know when they can claim their state pension.
Age UK warns that people who are unable carry on working could be in for a “nasty shock” and is calling for the government to allow early access to the state pension for those affected by the changes.
Caroline Abrahams, charity director at Age UK, says: “The most pressing and immediate concern is the hundreds of thousands of people in their 50s and 60s who are unable to carry on working today, and who are really struggling financially as a result.
"We are thinking, for example, of lifelong manual workers crippled by arthritis and carers who have given up work to look after an ailing partner or parent, and who face the prospect of being totally broke as they wait to claim their state pension.”
She adds: "The government needs to do much more to help people in this position now. More support should be given to those who are badly affected by increases in state pension age, like men and women earning low wages who are completely, or mainly, reliant on the state pension to get by in retirement.”
This article was originally written by our sister publication Moneywise.