The government’s intention to raise the state retirement age up to 68 by 2044, means that insurers will need to increase the expiry age of new and existing income protection products to match the proposals.
The basic state retirement age will rise to age 66 from 2024, age 67 from 2034 and age 68 from 2044 onwards. If you become permanently ill or disabled, and have an income protection policy that covers this, it is normal for payments to be made to you up until your normal retirement age when you can collect your pension instead.
Insurers are now looking to see if they could consider offering an extension of the current term for existing customers who may be young enough to be affected by the changes, as well as offering an increased term and later expiry age on new products sold.
Insurers may seek an increased premium for any extension. One argument is that there is an increased risk of the consumer claiming if they retire at an older age. The counter argument is that the reason the government is upping the retirement age is that most of us are living longer and are more healthy in our later years. The debate has started on what can or should be done. Some insurers suggest that system limitations mean they will be unable to amend existing policies, which could force customers to take out a new policy.
Another cause for complication is that what an individual customer needs may depend on the private pension arrangements individuals have, as these may differ to the proposals of the basic state pension.
For years, income protection insurance trundled on, offering the same product year in year out, and often with very little possibility of tailoring the cover to the individual. The retirement age is the most recent in a raft of factors that has woken insurers up to the need to improve their offering and make it more understandable.