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Contact us | www.future-financial.co.uk | E-mail your comments | Archive | |
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Ready to work longer? Thanks to changes already announced, we will soon all be waiting longer for our state pensions.
From next year, the state retirement age for women will start rising from 60 to 65; and from 2024, the retirement age for both men and women will gradually be increased towards 68, which will be achieved by 2046. If that sounds a long way off, it is worth considering that it will start to affect people who are currently in their 40s. It is understandable that the government is making these changes. We already know that, on current population projections, the proportion of the population that is working (and therefore paying national insurance contributions) is shrinking compared with the number of people over retirement age. It is also clear that people are living longer in retirement than previously. When do you want to retire? But if you were to ask most people whether they actually want to carry on working into their late 60s, or stop when they are much younger and better able to take advantage of a more relaxed lifestyle than most busy careers permit, they would probably opt for early retirement. Of course, for most people, the state pension will only form part of their retirement income; if they are members of an occupational scheme, or have a personal pension, this could well provide far more for them. So how important is the state pension? The state pension does matter But actually, the state pension could form quite a large proportion of a retired couple’s income. Let us take a very simple example of a couple who on the same day reach retirement age (65 for the husband and 60 for the wife). He earns £27,000 a year and is in a final salary scheme that provides the maximum 40/60ths (i.e. £18,000) as a pension, she has a personal pension scheme that will provide £3,000 a year. Because each has a full national insurance contribution history, they both receive the full basic state pension of £4,953 a year. Their total income is therefore £30,906 a year, of which the basic state pension contributes almost a third (£9,906). If they had to wait longer for their state pension, they would have to survive on a much lower income during the interim period; reducing their spending power considerably. Are there any other changes? If you reach 50 within the next few months, you should already be aware that the minimum age at which you can take private retirement benefits is about to rise from 50 to 55 (on 6th April). If you wish to draw benefits soon, you need to seek advice now. If you reach 50 after that date, you have no option but to wait. Anything else? Just to complicate matters, some politicians think that increasing state retirement age should be brought forward from 2024! It is important always to seek independent financial advice before making any decision regarding your finances. For further information, please contact your usual independent financial adviser. The value of investments is not guaranteed; you may get back less than you put in. Key Points: > Retirement will last longer as we reach greater ages > If state pensions start later, you will need to fill the gap, unless you wish to carry on working > The changes may not yet be finalised |
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