Millions of Brits will have to work an extra year to get their pension

The steady path to a dream retirement
The steady path to a dream retirement

The British government has announced plans to raise the state pension age to 68 seven years earlier than expected.

The country's pension age will be hiked to 68 over two years starting in 2037, affecting the retirement plans of roughly 7 million people.

The proposed change, which will help to ease an intense strain on pension finances, means an extra year on the job for workers born between April 1970 and April 1978.

Legislators must approve the change before it becomes law.

The age at which Brits are eligible for their pension is already set to rise to 66 by 2020 and 67 by 2028.

"As life expectancy continues to rise and the number of people in receipt of state pension increases, we need to ensure that we have a fair and sustainable system," said Secretary of State for Work and Pensions David Gauke.

Britain is just one of many developed economies that have been forced to raise their retirement ages as life expectancy increases.

There are widespread concerns that a growing bracket of retirees will put unbearable strain on state pension funds, which are financed in a large part by young, working taxpayers.

"Failing to act now in light of compelling evidence of demographic pressures would be irresponsible and place an unfair burden on younger generations," the U.K. government said.

The U.K. has offered a state pension to residents since 1948. It currently spends 5.2% of the nation's GDP on state pensions.

Related: How do I figure out how much to save for retirement?

In the U.S., the age to receive full social security benefits is set to rise gradually to 67.

In Canada, old-age pensions start paying out when you turn 65. But it will gradually increase to 67 by 2029, according to the OECD.

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