Could the State Pension Age rise to 68 sooner than expected?

The prospect of the State Pension Age (SPA) rising to 68 earlier than currently legislated has quickly become one of the most significant retirement planning developments facing financial advisers and paraplanners.

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While no final decision has been made, the Office for Budget Responsibility (OBR) is already assuming that the increase to age 68 will take place between 2037 and 2039, reflecting what the Treasury has described as the Government's current policy position.

Why advisers and paraplanners should start preparing clients now

If implemented, around five million people could face a further year's wait before receiving their State Pension. For many clients, that could mean a material change to retirement plans, income strategies and long-term financial security.

"Around five million people could face an extra year before receiving their State Pension."

Why is the State Pension Age under review?

Current legislation provides for the State Pension Age to increase to 68 between 2044 and 2046.

However, reports suggest the Government is considering bringing that timetable forward to 2037-39, following recommendations from previous reviews and ongoing work as part of the latest State Pension Age Review.

Although ministers have stressed that no final decision has been taken, the fact that the OBR has incorporated the earlier timetable into its long-term fiscal assumptions has increased expectations that legislative change could emerge in the coming years.

The rationale behind the proposal is straightforward. Long-term demographic pressures and an ageing population continue to increase the cost of providing the State Pension. According to the OBR, accelerating the move to age 68 could save the Treasury around £6 billion annually from 2037 onwards, helping to support the sustainability of public finances.

Which clients could be most affected?

The most immediate impact would fall on individuals born between 1971 and 1977, many of whom are currently engaged in retirement planning.

For clients expecting to retire at age 67, the change could create a one-year income gap before State Pension benefits commence. While wealthier households may be able to absorb this gap through private assets, the challenge is likely to be greater for middle-income and lower-income clients who rely on the State Pension as a core component of retirement income.

Former Pensions Minister Baroness Ros Altmann has been among the most vocal critics of the proposal, arguing that raising the State Pension Age is a blunt policy tool that disproportionately affects those in poorer health, physically demanding occupations and regions with lower life expectancy.

Her concern is that some individuals may be unable to continue working for health reasons but remain ineligible for State Pension support, potentially increasing financial hardship in later life.

These concerns may be particularly relevant to advisers working with clients in manual professions, those with health conditions, carers, and individuals with limited private pension provision.

"For many clients, this is far more than an administrative change. It could materially alter retirement plans."

What could it mean financially?

From a cashflow planning perspective, the implications are straightforward but potentially significant.

Research undertaken by Barnett Waddingham suggests that a 55-year-old earning the UK median salary of around £38,000 per year would need to contribute approximately an additional £74 per month into pension savings to replicate the income lost from a one-year delay in State Pension entitlement.

For higher earners, the overall cost may be similar, but the affordability challenge is very different. An additional £74 per month represents a significantly larger proportion of disposable income for average earners than for individuals earning £80,000 a year or more.

Importantly, these figures assume clients remain in full-time employment until retirement. Those planning to phase retirement, reduce working hours, take on caring responsibilities or retire early due to ill health may have considerably less time available to bridge any shortfall.

"A typical 55-year-old may need to save an additional £74 per month to offset a one-year delay to their State Pension."

Why advisers should revisit retirement plans now

While the proposal remains under review, advisers may wish to revisit existing plans for potentially affected clients.

Conversations could include:

• Whether retirement at age 67 remains realistic if State Pension income is delayed.
• The extent to which existing pension savings could bridge a one-year income gap.
• Whether pension contributions should be increased during the remaining working years.
• The role of salary sacrifice arrangements in improving pension funding efficiency.
• The use of ISAs and other accessible assets to supplement retirement income during the gap period.
• Contingency planning for ill health, redundancy or caring responsibilities later in life.

Cashflow modelling that compares retirement outcomes under both State Pension Age scenarios can provide clients with valuable visibility and help avoid unexpected challenges closer to retirement.

The wider retirement planning picture

The State Pension Age Review is taking place alongside another significant milestone: the Normal Minimum Pension Age (NMPA) will increase from 55 to 57 on 6 April 2028.

For many clients, particularly those planning to retire early, this change could be just as important as a potential increase in the State Pension Age.

Individuals born after 5 April 1973 will generally need to wait until age 57 before accessing defined contribution pension savings.

Those born between April 1971 and April 1973 may face more complex transitional arrangements and could require careful advice regarding pension crystallisation and drawdown strategies before April 2028.

For clients seeking flexibility, understanding how these two age changes interact is crucial. A later State Pension combined with delayed access to private pension savings could significantly alter retirement affordability calculations.

What action should advisers take now?

Although legislation has not yet been formally amended, the direction of travel appears increasingly clear, with policymakers continuing to explore ways of managing the long-term cost of State Pension provision.

This is particularly relevant given that the pensions triple lock remains politically sensitive and continues to be supported across the major political parties despite the increasing cost of maintaining it.

For advisers and paraplanners, the priority should be proactive communication rather than waiting for legislative changes to be finalised. Many clients will have seen media coverage of a potential increase in the State Pension Age but may not fully understand the implications for their own retirement plans.

"The priority should be proactive communication now, not waiting for legislation to change."

Planning ahead is key

The potential acceleration of the State Pension Age to 68 is not yet law, but it has become an increasingly important consideration for retirement planning.

If implemented, millions of people could face a one-year delay in receiving State Pension income, creating funding gaps that may require higher savings rates, additional working years or alternative retirement income strategies.

For advisers and paraplanners, the opportunity lies in helping clients understand the potential impact before any changes are confirmed. By reviewing plans now and modelling different retirement scenarios, advisers can help clients build greater resilience and flexibility into their long-term financial plans.

"Those who prepare early will be in a far stronger position, whatever timetable the Government ultimately adopts."