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19th May 2023
Plans by the French government to raise the retirement age by two years to 64 prompted widespread outrage, with protesters taking to the streets of Paris to make their objections heard.
The situation became so serious that police ended up firing tear gas at protesters, King Charles had to cancel his planned state visit to France, and you could have been forgiven for thinking that photos of the protests were actually images of a war zone.
Of course, observers in this country might be wondering what all the fuss is about. After all, the state pension age in the UK is currently 66 and the government is understood to be planning to increase it to 68, so some might argue that the French don’t know how good they have it.
But pensions and politics can be a toxic mix, so could recent events in Paris serve as a warning to politicians on this side of the Channel – not necessarily about civil disobedience, but about the strength of feeling that comes with making people wait?
The state pension age is due to go up from 66 to 67 by 2028 and then up to 68 from 2044.
Ministers were expected to announce in May that the changes would come much sooner – with a rise in the state pension age to 68 between 2037 and 2039. But the government now plans to wait until after the next general election before making this announcement.
Government insiders told the Financial Times that this is ostensibly because ministers want more time to review falling life expectancy figures, as lengthening life spans had previously been cited as a reason to justify increasing the state pension age.
Work and Pensions Secretary Mel Stride, meanwhile, believes a further review into the issue is needed because previous studies weren’t able to take into account “significant external challenges”, such as Russia’s invasion of Ukraine and the Coronavirus Pandemic.
However, another government source revealed: “They were gung-ho to raise the pension age, but they got cold feet.”
Announcing an increase in the state pension age could potentially alienate middle-aged voters, not necessarily to the point where they take to the streets, but at least enough to make them consider switching their vote.
Not wanting people to do that in the run-up to an election makes political sense, but delaying this announcement still piles uncertainty on people who really know what the deal is when it comes to their retirement.
As Paul Johnson, Director of the Institute for Fiscal Studies, observed: “Things do change – in this case projections of life expectancy – and it’s good to remain flexible in the face of change. On the other hand, this choice will affect those already in their fifties who need to be able to plan for retirement with some degree of confidence.
“Knowing when the roughly £10,000 a year state pension will kick in matters. As for the government, and hence the taxpayer, delaying the rise in pension age will cost north of £60 billion.”
Of course, any good financial adviser will tell you that you can’t rely on the state pension to fund your retirement, as it won’t be enough to cover all your living costs and give you the lifestyle you want and deserve. But it could still be a valuable top-up to your retirement income, so it’s important to know well in advance when you may be eligible to receive it, so you can factor it into your retirement plans.
This whole debate is an important reminder of why it’s so important to take matters into your own hands when it comes to planning for the future, at least as much as you possibly can. It’s in the government’s gift to decide when you can receive the state pension, so if you’re relying heavily on that income, deciding when you can retire is ultimately beyond your control.
By contrast, if you’ve made your own pension provision, you could be in a much stronger position to choose when you retire and take charge of your own destiny.
If you have any questions about planning for your retirement, please get in touch with us and we’ll be happy to speak with you.
Sources:
https://www.bbc.co.uk/news/world-europe-65057249
https://www.ft.com/content/e946e5c5-edd8-4d14-bf16-e66027860a84
