Access to state pension from age 63 not affordable without weekly reduction, Aegon warns

A move to allow individuals to take their state pension earlier than the age of 66 would have to be subject to a reduction in its weekly amount to make it “financially fair”, Aegon has stated.

This comes as a new petition calling for the government to reduce the state pension age to 63 has surpassed 2,000 signatures.

The petition suggests the government should be “doing more to create jobs for young people”, by allowing older people to retire if they choose to at 63, so that jobs can be filled by younger people. It highlights that such a move could also protect elderly people from needing to work if their job is too demanding.

However, Aegon pensions director, Steven Cameron, warned that the current debate around the state pension triple lock has shown it is “hugely expensive” for the government to provide.

“This is why with people generally living longer, the state pension age is gradually being increased to avoid further increases in the costs, which are met from the National Insurance contributions of those of working age,” Cameron said.

“But the older the state pension age is, the more difficult it will be for some in stressful or manual occupations to keep working until state pension age. There is a case for government to explore allowing people to choose to take their state pension from an earlier age, perhaps 63, but at a reduced amount to reflect the fact it is starting earlier and will be paid for longer.”

Cameron noted that offering early access at a reduced level could be a big help to thousands of people, but also highlighted it is already possible to defer taking state pension in return for an increased weekly amount.

He continued: “In the private pension space, pension freedoms have proved hugely popular in allowing people to take more control over when they start drawing their defined contribution pension and how much they take as their retirement progresses. But this is not mirrored in the state pension where despite the state pension age increasing, there is no flexibility to choose to take it early.

“This wouldn’t be without challenges and there would need to be a way of making sure people don’t end up with an income from state and private pensions below the means tested benefit level.

“Some checks and balances might be required but with some creative thinking, this issue shouldn’t be insurmountable and would be well worth the prize if it helps people with their transition into retirement.”

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