New State Pension Age - 70
Could the UK Follow Denmark in Raising the Retirement Age to 70?
As the global population ages and life expectancy continues to rise, governments are grappling with how to keep pension systems sustainable. Denmark has taken a bold step by announcing plans to raise its retirement age to 70 by 2040—sparking debate across Europe, including here in the UK.
Denmark’s Move: A Response to Demographic Shifts
Denmark’s decision is rooted in a long-term strategy to align retirement age with life expectancy. The country already links its state pension age to longevity forecasts, and this latest move is part of a broader effort to ensure the financial viability of its welfare system. By 2040, Danes will need to work until 70 before claiming their state pension.
What About the UK?
The UK currently has a state pension age of 66, with plans to increase it to 67 between 2026 and 2028, and to 68 by the mid-2040s. However, with similar demographic pressures and rising public spending, some experts argue that the UK may need to go further—perhaps even matching Denmark’s trajectory.
A recent review by the Department for Work and Pensions (DWP) acknowledged the need for flexibility in future pension age policy. While no firm decisions have been made, the idea of raising the age to 70 is no longer unthinkable.
Why is this important?
When the UK State Pension was first introduced in 1909, it was means tested. You had to be a man, aged 70 and of “good character”.
Whilst such stringent criteria probably wouldn’t find its way into today’s statute books – the age just might do and its quite possible that some of the younger generations could well see their own state retirement ages heading to age 70 if not beyond. So why is this important? Older financial planners will remember the day when it was possible to access personal pensions at age 50. This disappeared in April 2010, rising to 55. This is because women in the UK used to be able to access their State Pension from age 60 (65 for men) and there has typically been a 10 year gap between the earliest you can access private pension arrangements and the year in which your state pension comes into payment. Beginning in 1995, the age at which women would receive their state pension was gradually aligned to the age for men (65) – hence for the last 15 years, personal or workplace pension benefits can be taken from age 55, ten years before state retirement age.
However, with the state retirement age, now equalised for both men, now sitting at age 67 the earliest date from which you can access pensions benefits is rising to age 57 on April 6th, 2028, which could have a profound impact on people retirement plans.
The Debate: Fairness vs. Fiscal Responsibility
Critics of raising the retirement age argue that it disproportionately affects lower-income workers and those in physically demanding jobs, who may struggle to work into their late 60s or beyond. Others point out that life expectancy gains have not been evenly distributed across the UK, making a blanket increase potentially unfair.
On the other hand, proponents highlight the need to manage public finances responsibly. With more people living longer and drawing pensions for decades, the cost to the state is rising rapidly. Delaying retirement could help ease the burden on younger generations and ensure the system remains solvent.
What Could This Mean for You?
Delayed Retirement: If you were planning to retire at the traditional age, you might need to adjust your expectations. The new pension age means you will have to work longer before you can start receiving your pension benefits.
Financial Planning: With the pension age rising, it's more important than ever to have a robust financial plan. Consider increasing your savings and investments to ensure you have enough funds to support yourself during the extended working years and beyond.
Health Considerations: Working longer means you need to maintain your health and well-being. Regular exercise, a balanced diet, and routine medical check-ups can help you stay fit and capable of working until the new pension age.
Career Development: As you will be working for a longer period, investing in your skills and career development is crucial. Continuous learning and adapting to new technologies and methodologies can help you remain competitive in the job market.
How to Prepare for the Change
Review Your Pension Plan: Understand how the changes will affect your pension benefits. Speak with a financial advisor to get a clear picture of your retirement income and any adjustments you need to make.
Increase Your Savings: Consider contributing more to your retirement savings accounts. The earlier you start, the more time your money has to grow.
Stay Informed: Keep up-to-date with any further changes to pension policies. Governments may introduce additional reforms that could impact your retirement plans.
Plan for a Longer Career: Think about how you can sustain your career over a longer period. This might involve seeking new opportunities, retraining, or even changing careers if necessary.
What’s Next?
For now, the UK government is treading carefully. But as Denmark sets a new benchmark, pressure may mount for Britain to follow suit. Whether that happens will depend on political will, economic conditions, and the evolving needs of an ageing population.
The rising pension age is a significant change that will affect many people's retirement plans. By understanding the reasons behind the change and taking proactive steps to prepare, you can ensure that you are ready to meet the challenges and opportunities that come with a longer working life. Stay informed, plan ahead, and take control of your financial future.
