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Women could see state pension plunge by £10,000

Government changes mean two-year wait for pension

Government changes to the state pension age timetable mean that women born in 1954 (currently aged 58) will have to wait twice as long as women born in 1953 to claim their state pension, according to new Which? research.

While a woman born in March 1953 can retire at age 63, a woman born just eight months later in November 1953 will have to wait until age 65. This delay could shave £11,175 off her pension – the equivalent of almost two years’ worth of state pension payments. For more information on how the state pension works, read our guide, State pension explained.

Government changes state pension age timetable

So what’s the reason for this confusion? The government has made some alterations to the state pension age timetable. In 2011/12, the state pension age for women was between 60 and 61.

It was set to rise to age 65 (the same as men) by 2020, but the Coalition government has brought this forward two years, so the state pension age will equalise in 2018. This means that for women aged between 62 and 64, their state pension age will gradually rise in regular intervals from 62 in 2014/2015 to 63 by 2016/2017. So far, so good.

But it’s not as simple for women who were born after March 1953 (aged 59 to 60). The space between state pension age increases gets increasingly smaller, meaning that women born just a few months later than others will have to wait longer to claim their pension. Our table below details how younger women approaching retirement will be affected.

State pension age (SPA) for women
Current age Date of birth Official state pension age Date when woman will receive state pension
62 05/04/1950 60 Already over SPA
61 06/03/1951 61 Already over SPA
60 06/03/1952 62 06/03/2014
59 06/03/1953 63 06/03/2016
59 06/07/1953 64 06/07/2017
59 06/11/1953 65 06/11/2018
58 06/10/1954 66 06/10/2020
51 06/03/1961 67 06/03/2028
34 06/03/1978 68 06/03/2046

Other factors could reduce pensions

The changes to the state pension age timetable are accompanied by other factors that could also cause potential drops in people’s retirement income. The government announced plans to link the state pension age to longevity in the 2012 Budget, which means state pension age is likely to rise to 70 and beyond.

Most people use their pension fund to buy an annuity. But currently, annuity rates are at record lows thanks to the economic climate, which means that pensioners get less retirement income for their money. You can find out more about how annuities work in our Annuities guide. 

Women who buy annuities are also likely to get lower rates than men, because they live longer. However, this will change next year with the implementation of the EU gender directive, which means insurers will no longer be able to price annuities on gender. Our guide to Insurance gender discrimination rules has more information on this.

How to boost your income in retirement

Women caught in the accelerated part of the timetable may have to utilise their savings or access their private pensions early in order to fund their retirement – both of which would deplete the sources of income they will be relying on for the rest of their lives.

They could also work longer. According to new research from LV, 78% of women over age 50 who are still working say they expect to work beyond retirement age – compared with 52% of men. The majority of these women cited affordability as the top reason for working past retirement.

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