Global Trend of Delayed Retirement: At What Age Can People Retire in the UK? How Much Pension Can They Receive?
- TBA
- Jan 24
- 3 min read
Updated: Mar 13
In recent years, many countries, including France, Canada, Japan, and the United States, have adjusted their retirement ages, moving toward delayed retirement. This change is mainly in response to population aging, pension system pressures, and labour market changes.
By extending working years, the goal is to better adapt individuals, businesses, and governments to future economic and social demands while ensuring the long-term sustainability of pension systems.
As for the UK, it started its gradual delay in retirement by 2010, progressively raising the State Pension Age and delaying the time when individuals can receive state pensions.
What is the current retirement age?
Since October 2020, the statutory retirement age in the UK for both men and women has been 66, at which point they can start receiving state pensions.
However, this age may be increased. According to an independent review by the previous Conservative government, it is recommended to raise the state pension age from 66 to 67 between 2026 and 2028.
Recently, Labour Chancellor Rachel Reeves suggested raising the state pension age to 68 to save £6.1 billion for the Treasury, freeing up more funds for policing, education, and other areas.
How does the pension system work?
There are three main types of pension in the UK:
Basic State Pension
Workplace Pension
Personal Pension
Basic State Pension
This is the regular pension provided by the government once an individual reaches the state pension age.
The amount varies based on National Insurance Contributions (NICs), and taxes must be paid on it.
For those reaching state pension age after April 6, 2016, the New State Pension applies.
Eligibility: A minimum of 10 years of NICs is required. These contributions can come from paid work or from credits earned through certain benefits (e.g. for parenting or caregiving).
Amount for 2024/2025: The full New State Pension is £221.20 per week. This amount is adjusted annually based on the ‘Triple Lock’ policy, which increases it by the highest of wage growth, inflation, or 2.5%.
Those who don’t meet the minimum income threshold or care for disabled individuals may be eligible for Pension Credit. From April 2024, Pension Credit will be £218.15 per week (single) and £332.95 per week (for couples).
Those eligible for Pension Credit may also qualify for other financial support, such as housing benefit, council tax reductions, or help with heating costs through the Winter Fuel Payment and Warm Home Discount programs.
Workplace Pension
A workplace pension, also known as an employer pension, is legally required for employers to set up and contribute to for their employees.
Under the auto-enrolment system, if an employee is over 22 years old, below the state pension age, and earns more than £10,000 per year, their employer must contribute to a pension for them.
Employers and employees both contribute to this pension. Typically, employees contribute 5% of their pre-tax salary, while employers contribute at least 3%. The total minimum contribution is 8%, with tax relief applied to the employee’s contribution.
Though auto-enrolment is mandatory, employees can choose to opt out. However, by opting out, they miss out on the employer’s contribution and tax benefits. Employees who opt out can re-join at any time.
The age for accessing workplace pensions is the same as the state pension (and may be increased). Pay-out options include lump-sum withdrawals (with 25% tax-free) or purchasing an annuity for a steady income after retirement.
Personal Pension
Personal pensions run alongside state and workplace pensions and provide additional retirement income security.
They are often used by the self-employed, those without a workplace pension, or those wanting to increase their retirement savings.
Personal pensions can be set up with financial institutions, insurance companies, or pension providers and come with tax benefits.
There are various types of personal pensions, such as:
Stakeholder Pensions: Allow flexible contributions with funds invested in stocks, bonds, or other financial assets to grow over time. There are government-imposed fee caps.
Self-Invested Personal Pensions (SIPP): Provides individuals with control over their investment choices within tax-advantaged savings.
All types of pensions are subject to income tax upon withdrawal, with tax-free allowances of up to 25% of the total savings.
Tax on the remaining 75% depends on the pension’s value and the individual’s total income.