The state’s retirement age is expected to rise and rise as the treasury struggles to contain spending. From 2026, it will drop from 66 years today to 67 by 2028. It will rise again to 68 years between 2037 and 2039. Virtually everyone under 40 will be affected, but that’s only the start of the increase in the retirement age.
Thereafter, the state pension will increase according to life expectancy, said Becky O’Connor, head of pensions and savings at Interactive Investor. “Many workers today should assume that they will have to work until they are 70 and beyond.”
Even when they finally qualify for the state pension, millions of people will find it difficult to retire because it pays so little. Others will be too sick to continue working so late in life and will have to be content with their benefits.
The new state pension for those who retired after April 2016 is now worth just Â£ 9,339 a year, just a third of the national average salary.
Many will receive even less, because they have not contributed at most to 35 years of national insurance contributions. O’Connor said: “Millions of people are at risk of working a long lifetime, unless they start building their own retirement savings now.”
Here are five things everyone should do.
Find out where you stand. Order a public pension forecast online at Gov.uk/state-pension-age, by printing form BR19 or by calling the Future Pension Center on 0800 731 0175.
Also check your national insurance record. You must contribute 35 years to health insurance during your working life to get the maximum state pension. Next, put all of your corporate and personal pension plans together to see how much they’re worth today and in the future.
Find your retirement funds. With the average person having 11 jobs in their lifetime, it’s easy to lose sight of old company pension plans, said Carolyn Jones, retirement expert at Money and Pensions Service.
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Senior pensions and pensions analyst Helen Morrissey said women were most at risk. âLeaving your retirement plans in the hands of your partner could make you financially vulnerable if you separate. “
Use tax breaks for pensions. The government is offering generous tax breaks to encourage people to save for a pension, so take advantage of it. For a base rate taxpayer, pension contributions of Â£ 100 cost just Â£ 80 after tax relief, falling to just Â£ 60 for a higher rate taxpayer.
Increase pension contributions when you can. There’s a lot of pressure on people’s pockets, but don’t forget your long-term savings, Morrissey said. âIncreasing your pension contributions, for example, when you get a raise in pay, can have a big impact on the ultimate value of your pension fund. “