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Why we're going to get the state pension later and later
The government has vowed to link the state pension to life expectancy, or longevity, in a bid to curb the cost of introducing a new flat £140 weekly rate.
by Michelle McGagh on Jan 02, 2013 at 11:24
The government's plan to introduce a £140-a-week state pension will coincide with the linking of the state retirement age to life expectancy, meaning Britons can expect to retire later.
Chancellor George Osborne has said his support for the Liberal Democrats’ plan for a flat-rate state pension relies on linking the state pension to longevity, or life expectancy, according to the Financial Times.
By linking the state pension to life expectancy the chancellor hopes to keep the £140-a-week pension, which represents a rise in the state pension, cost neutral.
The state pension age is already set to increase from 66 to 67 by April 2028 and further rises would then happen in line with average life expectancy. The move to link pensions to longevity is an attempt by the government to curb the costs of the state pension which continues to grow as people live longer.
A white paper on state pensions reform was due in the summer but was delayed over cost concerns. It is now expected to be published next month.
According to the Office of National Statistics a man aged 65 today will live to 83 on average and a 65-year-old woman to 85.
The flat-rate state pension will help reduce the amount of means-testing needed for pensions and help increase the amount the poorest in society have to live on.
However, due to cost concerns it will also mean some people will receive less in retirement. Those who retire before the introduction of the flat rate in 2016 will not benefit from the changes and higher earners will no longer be able to build up additional retirement income by savings into the state second pension – although money already accrued in the state second pension will be honoured.
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