France has laid out proposals to increase its State Pension Age despite opposition. As the UK is currently reviewing its State Pension too, it’s something that you may need to factor into your retirement plan.
Under the new plans in France, from 2030, citizens will have to reach 64 before they can claim the full pension – two years later than the existing rules. What’s more, they’ll have to work for longer before they’re entitled to the full pension too. From 2027, it’s proposed that French workers will need to have contributed for 43 years if they want to receive the full State Pension.
Unsurprisingly, the reforms have been met with opposition, including from political opponents and unions.
So, how do France’s plans compare to the UK?
The State Pension Age is already higher than France’s proposed increase. Currently, both men and women can claim the State Pension from the age of 66, but it’s gradually rising. It’s scheduled to reach 67 in 2028 and 68 in 2046.
However, compared to France, Brits need to work fewer years to claim the full State Pension. To receive the full pension, you’ll need 35 qualifying years on your National Insurance (NI) record. This provides more flexibility for people that want to take time away from work, such as to study or look after relatives.
The government is currently reviewing the State Pension, and it’s expected to announce changes this year.
According to the Office for Budget Responsibility, the State Pension is the largest single item of wealth spending – it accounted for 42% of welfare spending in the 2022/23 forecast. With the State Pension set to increase by a record 10.1% in April 2023, this could rise even further.
As the government faces a fiscal black hole, making changes to the State Pension could be a way to reduce spending.
Could the government speed up the State Pension Age increase?
While the government hasn’t made any announcements yet, there’s speculation that the planned increase to the State Pension Age will be accelerated.
It could mean the State Pension Age reaches 68 earlier than the current plans suggest. As the State Pension provides a reliable income throughout retirement, it could have a significant effect on your plans, especially if you want to retire early.
It’s also possible that the number of qualifying years you need on your NI record to receive the full State Pension will increase too.
Under the current rules, you need 10 qualifying years to be entitled to any State Pension. If you have between 10 and 35, you’d receive a proportion of the full State Pension. So, it could become even more important to keep an eye on your NI record during your working life, claim NI credits if you’re entitled to them, and potentially fill in gaps.
Any announcements the government makes will likely be gradually introduced. So, if you’re nearing retirement, they may not affect you, but workers with some years to go before they reach the milestone could find it affects their long-term plans.
A retirement plan could help you stay on track, even if things change
While retirees often need other income sources to supplement the State Pension, it plays an important role for many people.
As you know you’ll receive the State Pension each month, it can create financial certainty if your other income sources are flexible or dependent on factors outside of your control, like investment performance. The State Pension also rises each tax year under the triple lock, which can help maintain your spending power.
If you want to retire before the State Pension Age, it’s crucial to consider how you’ll bridge the gap. Having to wait longer than you expected to access the State Pension could lead to a shortfall and mean you deplete other assets faster than planned.
If you don’t update your retirement plan, it could mean you risk running out of money or needing to adjust your spending later in life.
Creating a retirement plan that sets out your goals, including the age you want to retire, and regularly reviewing it, can help you incorporate government changes and mean you’re more likely to secure the retirement you want.
Take control of your retirement and contact us
It’s never too soon to start planning for retirement. Taking control of your plans means you’re more likely to reach your goals and enjoy the retirement you’re looking forward to.
Please contact us to arrange a meeting to talk about your retirement goals and the steps you can take now to secure them. We’ll also work with you to regularly review your plan so you stay on track, even if government changes affect you.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.