I’m expecting to be in my eighties when I reach state pension age.
Even if it’s earlier, I’m not confident what the state pension will be or if it’ll be worth much by the time I retire.
Who knows. It could even have ended up frozen like the £10 Christmas Bonus, which, having not risen in more than four decades, has seen its value erode due to inflation.
With uncertainty about the affordability of the state pension, I’m hesitant to even include it in my retirement plan. I am from the auto-enrolment generation though, so I feel reassured to have been encouraged, and able, to contribute to a workplace pension all my working life. Many women who are now retired have told me they didn’t have the same opportunity.
While we can’t be certain exactly what retirement savings we will end up with, I’m hoping that building up private retirement savings from a younger age, combined with the power of compound interest, will mean I have enough to get by in the future.
Pension saving doesn’t bring certainty, of course, but neither does the state pension triple lock, Jessica Sheldon writes
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Of course, having access to the cash I’m squirrelling away for retirement would really help me get on the property ladder, but considering the surging cost of the state pension, I don’t think 'pensioner me' can afford for '2023 me' not to plan ahead.
It might sound pessimistic, but I have interviewed so many people in their 80s who are struggling to get by, spoken to 1950s women who retired before realising their state pension age had changed, and heard the devastating reality for people who have used up their life savings when they were forced to leave work due to ill-health. So, it’s hard not to prepare for the worst-case scenario.
As with all investments, pension saving doesn’t bring certainty, of course, but neither does the state pension triple lock.
We’ve already seen a temporary suspension to the triple lock when the earnings element was ignored for the 2022/23 financial year.
There was cross-party support for the triple lock in manifestos for the 2019 general election, but both the Conservatives and Labour are yet to confirm if it will remain a manifesto commitment in the upcoming general election.
I think the triple lock has and is an important tool in pulling pensioners out of poverty, and I support uprating the state pension to keep up with increased living costs and rising earnings.
But we all need to have a conversation about state pension affordability, so the pension savers of today can make arrangements for the future. And we can’t keep putting it off because, to make the arrangements, we need notice from the government about what to expect. Otherwise, we’re at risk of ending up much worse off.
Earlier this year, the Institute for Fiscal Studies (IFS) said the triple lock creates uncertainty for the current and future generations.
According to their calculations, maintaining the triple lock could increase spending by anywhere between a further £5billion and £45billion per year (in today’s terms) by 2050.
That’s a big range, and I’m worried it could prove too expensive.
The IFS has warned retaining the triple lock for too long will increase the state pension so significantly it leads to "insurmountable pressure" for a much higher state pension age.
The state pension age is already set to rise again to 67 and, later, to 68.
But is an increased state pension age the answer?
To allow working-age adults to plan their finances in the long term, I think the Government should outline a plan which looks that far ahead also.
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The IFS has proposed replacing the triple lock with a new four-point guarantee
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The IFS proposed a new system this week, which would see the Government state what it thinks is an appropriate level for the new state pension relative to average earnings and legislate a pathway – and timetable - to meet it.
Once the state pension reaches that target, it’s proposed that the triple lock would be replaced.
The state pension would no longer rise by the highest out of earnings, inflation or 2.5 per cent under this system, but instead, the state pension would rise in line with average earnings, so pensioners can benefit when living standards rise.
The IFS’ four-point guarantee would still protect pensioners during times of a recession though, as it would continue to increase at least in line with inflation.
It has proposed to guarantee the state pension will not be means-tested, and the state pension age would only rise as longevity at older ages increases, and never by the full amount of that longevity increase.
What’s more, to increase confidence and understanding, the government would write to people around their 50th birthday, stating what their state pension age is expected to be. The IFS also proposed their state pension age would be fully guaranteed 10 years before reaching it.
Whatever happens, I hope the proposal will encourage more debate over the state pension’s future and help us all to prepare.