A warning has been issued as thousands of Brits do not understand the Department for Work and Pensions’ (DWP) state pension age.
According to new research from the Institute for Fiscal Studies (IFS), there are “significant knowledge gaps” among Brits approaching retirement. The study found that just four-in-10 people with a state pension age between 66 and 67 correctly know their state pension age within three months.
A concerning 42% overestimated when they could claim their pension, while 12% underestimated it, and a further 5% admitted they had no idea when they could access their state pension.
Currently, the UK’s state pension age is 66 for both men and women. However, starting next year, it will gradually increase, rising to 67 in April. The transition process is then expected to be completed for everyone by March 2028. The planned change to the official age of retirement has been in legislation since 2014, with a further rise from 67 to 68, which is set to be implemented between 2044 and 2046.
The picture is slightly better for those with a state pension age of 67, with 60% knowing they can claim the DWP payments from this age. The IFS expressed particular concern that 11% did not know their state pension age at all.
Another 11% underestimated it, meaning 22% of individuals overall have major knowledge gaps regarding when they can claim their payments – this equates to approximately 130,000 people. The IFS warn that these misunderstandings could lead to poor decision-making about savings or retirement timing.
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IFS senior research economist Heidi Karjalainen commented: “If individuals discover that they have to wait longer than they had thought to claim the state pension, they may regret having retired or not having saved more.”
She emphasised this is “especially important” as the state pension age rise from 66 to 67 is “imminent”, adding: “It is important that there are clear communications from both the government and private pension providers.”
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The last increase to the state pension age was introduced in December 2018 when it started to rise from 65 to 66. This was completed by October 2020, and those affected by this change were women born on or after April 6, 1953 or a man born on or after December 6, 1953.
The next rise in the state pension age will begin in April 2026, affecting anyone born after 6 April 1960. The next rise to 68 would impact those born after April 1977. However, the plans may change.
Under the Pensions Act, the state pension age is reviewed regularly once every five years. The review often returns recommendations that the government accepts, rejects, or comments on. The 2017 review suggested the rise to 68 should be in 2037-39, which would affect those born between April 6, 1970 and April 5, 1978. However, the 2022 review recommended a slower increase to 68, in 2041-43, and it mooted a possible rise to 69 in 2046-48.
The former Tory government acknowledged the recommendations but delayed the decision, promising to hold another review within two years of the next parliament. The next review will be held under the Labour government.
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