Are you on the state pension cliff edge and is the triple lock safe? Experts reveal what YOU need to do

The Sun

3 days ago

MILLIONS of Brits could work for longer after the government announced a review of the state pension age this week.
Chancellor Rachel Reeves says a review is needed to keep the state pension system 'sustainable and affordable'.
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The current State Pension costs the Treasury around £125 billion a year – and it's only going to go up as we all live longer.
The triple lock promise, which guarantees that the state pension increases in line with inflation, wages or 2.5%, is expected to hit £15.5billion a year by 2030.
Blathnaid Corless and Ruth Jackson-Kirby explains what is happening and what YOU should do now.
What is happening?
The state pension age - when you can start claiming - is currently 66. It is rising to 67 by 2028 and 68 by 2046.
A new review means the rise could be accelerated and the state pension age could even rise to 69 or 70.
The government reviews the state pension age every six years and the next review was due in 2029 - but will now come in 2027.
Rachel Vahey, head of public policy at AJ Bell, said: "An increase to the state pension age from 66 to 67 is already slated to happen between 2026 and 2028.
"But it's less clear what will happen after that.
"There is also an increase to age 68 pencilled in for 2046, but a faster increase is definitely on the cards.
"The first two reviews of the state pension age advocated bringing this forward, but successive governments have treated the issue like a hot potato."
The government has also asked the Pensions Commission to tackle a savings crisis faced by retirees, including how much is saved via minimum auto-enrollment contributions and how to help self-employed people.
Hargreaves Lansdown head of retirement Helen Morrissey, said: 'The concern is that many people are not saving enough and risk not having enough in retirement.'
When will I get the state pension?
The big question is whether the move to a state pension age of 68 will be brought forward.
Any changes could mean people in their mid-50s being left facing a gap between when they planned to retire and when they can start claiming their state pension.
For anyone under 55, it means that you will have to factor in working longer into your retirement plan.
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Former pensions minister and LCP partner Steve Webb said: 'The most likely change in the short to medium term is getting to 68 sooner, as this has been recommended by two previous reviews of state pension age.'
A previous review, called the Cridland Review, recommended that the rise to 68 should be brought forward.
Whatever happens the government must give at least 10 years notice of any increase to the state pension age.
If the state pension age rises to 68 earlier than planned, people born in the early 1970s could lose out on £17,340, based on the state pension rising 2.5 per cent each year, according to AJ Bell.
You can see when you will get the state pension as planned by using our Sun Club tool at thesun.co.uk/money/state-pension.
'We're relying on the pension... and now it's going to be pushed back and back'
NICOLA Jones, 58, gave up her job as a mental health worker last year to become a full-time carer for her partner Tracy, 54, who has MS.
The couple say they're very worried about potential changes to the state pension age, which they're hoping will ease the financial strain of living solely off benefits including Universal Credit and Carer's Allowance, which give them a joint monthly income of £1118.67.
While Nicola will not be affected by the predicted changes, Tracy probably will.
'We're on the bread line as it is because I'm a full time carer and we have no savings. We keep hearing that people should be saving towards their pension, but we can't do that,' Nicola said.
'We're really struggling as it is, and we would rely on the pension coming in and just easing our life really and just making it less stressful, and now it's going to get pushed back and back - I mean, I've heard it could be going up to 70.'
Is the triple lock safe?
Raising the state pension age isn't the only way the government could cut its retirement bill - it could look at the triple lock.
It has been a brilliant support to pensioners against inflation but at a huge cost to government finances.
The government has ruled out axing the triple lock guarantee before the end of the current Parliament, which will be in July 2029 at the latest.
Ms Morrisey said: 'Over the longer term we may well see the triple lock evolve - one option could be for it to move towards being a double lock instead.'
Calum Cooper, head of Pensions Policy Innovation at Hymans Robertson, said: 'We estimate it should be replaced in the 2030s – it's a question of when, not if.'
Another option could be looking at making it means tested - but this is unlikely, suggests Steve Webb.
But he adds: 'Other changes could include increasing the number of years of contributions needed for a full pension'. At present you need 35 years to get the full state pension.
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Is your pension about to be taxed?
Another problem facing future pensioners is tax.
You can earn up to £12,570 before you have to start paying income tax. That's your Personal Allowance.
The full state pension is £11,973 a year – just £597 below that threshold.
With the Personal Allowance frozen until at least 2028 millions of pensioners are heading towards paying tax on a state benefit.
It's a looming political disaster that any government will want to avoid.
What should you do now?
The planned shake-up to rules shows that 'relying on the state pension alone for your retirement income is risky', says Rachel Vahey.
'If you're forced to wait a year or two to claim it, you'll either need to work longer or find tens of thousands of pounds extra from your pension and private savings to plug the gap,' she adds.
If you're approaching retirement and concerned about your savings, she suggests downsizing your home to free up cash, or moving into another job, possibly part-time.
'The best way to give yourself freedom to retire on your own terms is to build up your private pension pot,' she says.
Even if you're not yet approaching retirement, you should keep an eye on your pension savings so you know what you're on track to receive and can work out if you need to increase your contributions, Ms Morrisey added.
'Taking small steps like increasing your contribution to your private pension every time you get a pay increase or new role can make a big difference to what you end up with in retirement.'
You should also make sure you haven't lost track of any old pensions from previous jobs, as you could be missing out on thousands of pounds.
If you have lost track of a pension, you can use the government's pension tracing service to track it down, either by phone or at www.gov.uk/find-pension-contact-details.
You can also use Gretel, a free online service that takes minutes to sign up.
'Once you've got a true idea of how much you have saved then you can make a plan to move towards the kind of retirement you want,' Ms Morrisey adds.
For a single person looking for a 'moderate retirement' later in life, which would allow you to have a two-week holiday in Europe, a long weekend break in the UK, some eating out, as well as the ability to run a small car, you'll need to have a single annual income of £26,129, according to Hargreaves Lansdown.
The State Pension isn't going to disappear or change overnight but pressure is building, and the current benefit is unsustainable.
'There's no doubt that making sure you have a good private pension is the best protection against future changes which make the state pension less generous,' concludes Webb.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people's National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.