Could retiring later be the answer?
This may seem a surprising suggestion. Surely most people are eagerly looking forward to early retirement, not thinking about postponing it. Who would vote for more time at work when it could be spent on the golf course, in the garden or on the beach?
But times have changed significantly since the old age state pension was first introduced in 1909. In those days, it was paid to those aged 70 or more and people weren’t expected to live many years beyond that.
The moving State Pension
The UK Government is in the process of raising the state pension age to 66 (from the current 65), with an expected completion deadline of October 2020. These rises in the state pension age roughly correlate with the rise in life expectancy. People live on average at least another fifteen years beyond their ‘three score years and ten’.
Back in 1948, a 65-year-old would expect to take their pension for about 13.5 years, equating to 23% of their adult life. This has risen steadily. Figures in 2017 showed that a 65-year-old would expect to live for another 22.8 years, or 33.6% of their adult life.
The rise of the centenarian
A significant number of people even live to 100 these days. So much so that the Queen has had to expand her centenarian letter writing team to cope with the number of people requiring a 100th birthday message from the Palace.
According to the Office of National Statistics, the number of centenarians in the UK has increased by 85% over the last 15 years. This trend is set to continue so that by 2080 it is anticipated there will be over 21,000.
In recognition of the fact that people are living longer and spending a larger proportion of their adult life in retirement, a government review will consider increasing the state pension age to 68 between 2037 and 2039.
A long (and expensive) retirement
Currently, if someone retires at 65 and lives to 100 it makes for a long retirement. Not only is it expensive for the state to maintain, it’s expensive for the retiree too! The state pension was not designed to support a long period of limbo and neither were your private pension savings.
Against such a backdrop, it makes sense for some individuals, if they are fit, healthy and capable, to consider working beyond their pension age. There is no longer any default retirement age at 65, so it is perfectly possible to do this.
The silver workforce
The older generation also has a great deal to contribute to an employer in terms of experience and commitment. It’s a well-known fact that going to work each day gives people a reason to get up in the morning, keeping their mind and body young. There are many unfortunate cases where someone has worked all their life, looking forward to their retirement, only to fall seriously ill or die the moment they stop work.
The number of 70-year-olds in full or part-time employment has been steadily increasing year on year for the past decade, according to data from the Office for National Statistics. This hit a peak of 497,946 in the first quarter of 2019, an increase of 135% since 2009.
So rather than just worry about whether you will have enough for your retirement, maybe it makes sense to keep working a little bit longer.
If you want to know more when you can afford to hang your boots up, or when you’re going to receive your State Pension, just drop me a line.
All the best,
James Mackay, Independent Financial Adviser in Bristol