The UK government has outlined plans for an increase in the age at which people are entitled to a state pension. At present, the retirement age for men is 65 and for women it’s 60 but women will soon find that theirs goes up to 65 too. The current government plans have the state pension age increased to 68 for everyone by 2046.
Britain’s ongoing battle with bad debt is being fought on two fronts and increasing the age at which we become entitled to a state pension could counter both. Firstly, with an aging population, the government’s spending on pensions looks like it will just keep growing. In fact, 4.4% of Britain’s GDP will be spent on state pensions in 2012, growing to 6.2% by 2032. If the plans for increasing retirement age go ahead, this would be reduced to 5.8%. In addition to this, debt on a personal level could potentially be eased by allowing people to work on longer in order to settle things like their mortgages.
However, Age Concern has warned of the potential costs of the proposed increase in retirement age. On a more personal level, people who have already calculated the impact that their state pension will have on their future finances could be caught out and find themselves facing the stress of debt problems instead of the relaxation of retirement. Of course, if you are currently facing the prospect of enforced retirement but want to keep on working to clear off your debt, the report will offer little solace.
A recent study has also suggested that increasing the state pension age to 70 within the same time would cut about £9billion a year off the UK’s deficit. The government would again benefit from a substantial reduction in state spending on pensions and more taxes as people would be working longer. It’s been suggested that the strength of the economy in the post-war years, as the baby boomer generation moved through the workforce, is set to be counterbalanced with longer periods of retirement. Essentially, either taxes will have to be increased to deal with the increased cost of longer state pensions, health and long-term care, or people will have to work longer to pay off their own debt and that of the country as a whole.
It’s not certain what will happen in the future. It does pay to plan for every eventuality though. You may find yourself working longer and using these earnings to pay off your mortgage and settle your debts before you retire. However, your circumstances can change at any time so it’s never too early to start paying off debts. Talk to a specialist debt advisor at Harrington Brooks, one of the longest established financial institutions in the UK, for impartial advice on the best debt solution to your personal debt problem.