Thousands of women just woke up £3.5k better off

The government has delayed a planned rise in the state pension age. Robert Powell takes a look at who stands to benefit from this move...

One year of full-time employment at lovemoney.com down, 46 to go. As if the State Pension age keeps escalating at its current rate, I’ll be lucky to be spending my days chomping on Werther’s Originals and Ovaltine at 70.

But there has been some good news in the last fortnight for future retirees. A proposed increase in the State Pension age has been delayed for half a million people.

The basics

Firstly, a few facts:

• State Pension Age for men and women will now rise to 66 in October 2020, not in April 2020 – six months later than was previously planned.     
• The change to State Pension Age will be being staggered in more slowly for anyone who is due to turn 66 before October 2020. As a result, the maximum increase delay anyone will suffer before they are deemed to officially reach Stage Pension Age will now be only 18 months, not two years.

This means:

• 33,000 women born between March and April 1954 will be around £3,500 better off.  
• 245,000 women and 240,000 men will also be better off.
• The government will have to shell out another £1 billion to pay for the change.

Right, that’s the basics out of the way. Now for the detail of how this change will affect you.

Martha’s story

Imagine, if you will, a beautiful 57-year old lady named Martha. Martha was born on 7 March 1954. And she’s very upset that you forgot her birthday this year.

Martha spent most of her working life assuming she would reach State Pension Age when she turned 60 in 2014. 

Then, in 1995, the Conservative Government announced it was bringing the State Pension Age for women in line with the State Pension Age for men: so 65 years of age. This change would be staggered in over many years, to ensure it wasn't a huge financial shock for women nearing retirement age. So, some women who are currently in their 50s would reach State Pension Age when they were 61, some when they were 62, some when they were 63, and so on, until 2020 - when State Pension Age would officially become 65 for everyone.

Martha's all for equality but she wasn't exactly thrilled about this change. She was told she would reach State Pension age on 7 March 2018 – her 64th birthday.  That's four years later than she had initially expected, meaning she would lose out on four years of weekly State Pension pension payments.

But there was worse news to come for poor Martha. In September 2010, the new Coalition government decided to bring forward the date that the State Pension Age would officially become 65 for everyone. This change would now take place in November 2018. For Martha, this pushed back her State Pension age by a year – to her 65th birthday; 7 March 2019.

And then, to make matters worse, the government also decided to keep pushing up State Pension age beyond 2018. Now, there would be a gradual increase to 66 by April 2020.

For Martha, this pushed her State Pension age back another year, to one day before her 66th birthday; 6 March 2020. That’s another two years of pension payments snatched away and two years of extra work added on. All in the course of one government spending review.

Needless to say, Martha was not happy about all this.

Fortunately this new move will chop this two year delay down... slightly.

How it will affect you

By delaying the introduction of the 66 year old State Pension until October 2020, the 33,000 women (with birthdates between 6 March 1954 and 5 April 1954) who would have been hit hardest by the initial changes will get their pension payout six months earlier.

So to go back to my fictional 57-year old Martha: she’ll now officially reach State Pension Age on 6 September 2019, instead of the 6 March 2020. This will boost her State Pension payout by £3,640; if she is eligible for the full £140 per week rate (this rate will be in operation from 2016).

Confused? Don't be. The table below details how the changes will affect you.

Look at the two bolded columns to match up your date of birth with your new State Pension Age.

The remaining four columns explain how much earlier you will get your State Pension thanks to these recent changes and what level of pension boost you’ll get.

Source: Department for Work and Pension and my own working.

So as you can see, if you were born between 6 January and 5 September 1954, these latest changes will have increased your State Pension payout.

And it’s not just women who will benefit: 240,000 men will also be able to retire up to 6 months earlier. Again, take a look at the table above to find out if you’re set to benefit.

Future rises

So what about all of us young’uns that haven’t turned 50 yet?

Well, everything’s fairly unclear at the moment. Current plans will see the State Pension Age increase to 67 between 2034 and 2036 and then 68 between 2044 and 2046.

But that could, and probably will, change. In fact, with word of linking the State Pension Age to life expectancy floating around Westminster – it could be a while until I get to crack open the Werther’s Originals and Ovaltine for good.

More: Get ready for biggest pension shake-up in history | Five tricks to boost your pension | The Bank of England is damaging your pension