The government will look after us, won’t they? If you are poorly, we can turn to the National Health Service; if we lose our job, we can claim state benefits. And once we are officially too old to work, the state will pay us a pension.

But therein lies a problem. We are all living longer and as a result the government has decided it cannot afford to pay our state pensions for as long as it used to. They have known for some while that it was coming and initially used equality laws and arguments to increase the age (65) at which women became eligible for state pension to be the same as for men. Campaigners tried to claim that the move was illegal, but they have all lost in court.

Last month we saw the start of the second phase of the government’s long-term plan come into force, when the state pension age was officially raised from 65 to 66. It affects anyone born after 6th October 1954 and will be held at that level for the next six years, following which it will rise to 67. There are plans for further increases in pension age until it reaches 70 in 20-30 years’ time.

Waiting another 12 months to draw from the pot

It goes deeper than just waiting another year for our state pension. The age at which we stop paying National Insurance on our earnings is aligned to state pension age. 65 year olds therefore pay into the system now for one year longer as well as waiting a further 12 months to draw from the pot.

What else can the government do? It has already introduced compulsory company pensions for those in employment, which have now reached maximum contribution levels by both employer and worker. The argument is that the more money that is in your personal pension, the less you will need to rely on the state.

The level of government pension is guaranteed to rise by reference to inflation, with a guaranteed minimum increase of 2.5% if inflation is lower than that. There are suggestions that the government should go back on its word and remove the guarantee. It wouldn’t be the first time they had done something like that, would it?