Women will not face two-year increase in state pension age, Government says

The Pensions Bill, which is currently going through Parliament, will raise the retirement age for women to match that of men in 2018 before it rises to 66 for both sexes in 2020. Welfare Secretary Iain Duncan Smith has announced that the Bill will be amended so that the increase to age 66 will take place for men and women in October rather than April 2020.

The additional six months means that no woman will retire more than 18 months after she expected to, the Government said.

"We have listened to the concerns of those women most affected by the proposed rise in state pension age to 66 and so we will cap the increase to a maximum of 18 months. We have always made clear that we would manage any change fairly and ensure any transition is as smooth as possible," he said.

Pensions law expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that the amendment was estimated to cost the Government an additional £1.1 billion.

"This is all about compromise. Some women will be helped out by the amendment, but not all. The Government would have felt it was unable to take a larger hit," he said.

Industry body the National Association of Pension Funds (NAPF) said that the change would help a quarter of a million women who would otherwise have been waiting up to two years longer for their pension.

"This is a useful bit of leeway. People need time to prepare their finances for the transition into retirement and there's now a clearer ceiling on what to expect. But a lot of women in their late 50s are still being told to wait another 18 months, and many will struggle to bridge the gap," said NAPF chief executive Joanne Segars.

Recent press reports have suggested that the retirement age may need to rise further as early as 2026. In an interview with the Observer newspaper last month, pensions minister Steve Webb suggested that the timetable proposed by the previous Government was too slow. Currently the state pension age is due to rise to 67 in 2036 and then to 68 by 2046.

"If it is 67 by the mid 2030s we will be going backwards in terms of share of your life in retirement. I mean the problem would be worse than 20 years before," Webb told the newspaper.

The age at which men could receive the state pension was set at 65 in 1926 when there were nine people of working age for every pensioner, the Government said. There are now only three people of working age for every pensioner and it is estimated that this will fall to nearer two by the end of the century.

£45 billion extra will be spent on pensioners by 2025 because of the Government's triple guarantee to uprate the basic state pension by the highest of the rate of increase in earnings, prices or 2.5%, it said.