Retirement Age Rises to 67 – What are the Changes to Wages and National Insurance Contributions?
- TBA
- Jun 24
- 5 min read
Following the start of the new tax year, the State Pension system is undergoing a series of significant changes.
From 6 April 2026, the State Pension age is gradually increasing. This not only affects when individuals can retire, but it will also have a profound impact on income, employment, and overall life planning.
If you are currently formulating or already have a retirement plan, understanding these changes is particularly important.
State Pension age increase
According to the government's established schedule, the State Pension age is gradually increasing from 66 to 67.
This adjustment officially began in April 2026 and will be completed by early 2028, applying to both men and women across the UK.
This policy was first proposed in 2011 and confirmed by legislation in 2014. The Pensions Act 2014 not only brought forward the process of raising the age from 66 to 67 by eight years, but it also adjusted how it is implemented.
Specifically:
For those born between 6 April 1960 and 5 March 1961, the pensionable age will be 66 plus a specified number of months.
For those born between 6 March 1961 and 5 April 1977, they will become eligible upon reaching their 67th birthday, rather than on a single fixed date for an entire cohort.
Furthermore, under the Pensions Act 2007, the State Pension age is set to rise further from 67 to 68 between 2044 and 2046. This means there is a strong possibility of further increases to the retirement age in the future.
The core reason for raising the State Pension age is shifting demographics. As life expectancy continues to rise, the number of people claiming a pension is increasing, and the duration of their claims is lengthening. This places sustained pressure on public finances.
The Office for Budget Responsibility estimates that raising the pension age from 66 to 67 will save the government approximately £10 billion per year by the end of this decade. Therefore, raising the retirement age is viewed as a crucial policy tool for controlling pension expenditure.
At the same time, the law dictates that the pension age must be reviewed at least once every five years. The underlying principle of this is to ensure that UK residents spend a certain proportion of their adult lives eligible to receive a pension.
The practical impact of the retirement age increase
While financial savings at the policy level are highly important, what matters more to the average person is how this change will affect their daily life.
Delayed pension claims
The most direct impact is the delay in being able to claim a pension. This means many people will temporarily lose the pension income they would otherwise have received, thereby lowering their disposable income.
Research shows that when the pension age previously increased from 65 to 66, the relative income poverty rate among the affected demographic more than doubled, jumping from 10% to 24%. This indicates that for some groups, policies of this nature can create significant financial pressure.
More people delaying retirement
The increase in the pension age also impacts employment. Historical data demonstrates that a segment of the population will choose to delay retirement and continue working. For example, when the pension age rose from 65 to 66, the employment rate for 65-year-olds increased by roughly 10 percentage points.
However, this shift is largely concentrated within a minority. Overall, only about one in ten people will extend their working lives due to the policy change, while the vast majority will stick to their original retirement plans. Additionally, this increase in employment stems primarily from people remaining in their current roles, rather than re-entering the workforce or taking up new jobs.
It is important to note that as people age, employment rates naturally decline at a rapid pace, while the risks of health problems and disabilities increase. These factors restrict the ability of older age groups to continue working. Consequently, with the pension age rising to 67, the potential for employment growth may be much smaller than seen previously.
Changes to wages and National Insurance contributions
For employers, the change in the pension age will also require practical, operational adjustments.
Once an employee reaches State Pension age, they are no longer required to pay employee National Insurance contributions, but the employer must still continue to pay secondary Class 1 contributions. This means businesses must ensure they promptly update the insurance category of their employees within their payroll systems.
For example, after an employee reaches pension age, their National Insurance category must be adjusted to 'C' in the payroll software, which stops the deduction of employee contributions. This adjustment is treated as a mid-year category change, meaning employers need to record the year-to-date figures separately for both before and after the change until the tax year concludes.
Employers are also required to verify documentation proving that the employee has reached pension age, such as a passport or a birth certificate.
A summary of new tax year State Pension rates
The State Pension age is the earliest point at which an individual can begin claiming their State Pension. This age may differ from the time they can access an occupational pension or a personal pension.
Alongside the policy changes, pension amounts have also seen an increase. From 6 April 2026, the new rates are as follows:
Full new State Pension: £241.30 per week, £965.20 every four weeks, and approximately £12,547 annually.
Full basic State Pension: £184.90 per week, £739.60 every four weeks, and approximately £9,614 annually.
Category B (based on a spouse or civil partner's insurance), Category C, and Category D (non-contributory) pensions: £110.75 per week.
Individuals can use the online checking tool provided by the UK government to find out when they will reach State Pension age, when they will qualify for Pension Credit, and when they can access related benefits, such as free bus travel at age 60 in Scotland.
The government is currently conducting a separate independent review into the State Pension age alongside the work of the second Pensions Commission, which was established in 2025 and is expected to publish its final report in 2027.
The reviews will examine changes in life expectancy, savings levels, auto-enrolment, and pension matters relating to the self-employed. The findings could influence whether the pension age will be raised even further in the future. However, any new adjustments must first secure parliamentary approval before they can be officially implemented.
In an environment of constantly shifting policies, understanding your pension timeline early on is a vital step in long-term financial planning.
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