Are you ready for retirement? Thanks to longer life expectancy most of us now expect to work for longer, with the majority of Brits expecting to retire between the ages of 65 and 69. With the average Briton living until 82 years, this means our savings will have to fund more than a decade of retirement.
According to the latest Wealth and Assets report from the Office for National Statistics investors consider workplace pensions the safest way to fund this retirement – and they would certainly be on the right track. Thanks to auto-enrolment, around 10 million people in the UK will be saving into a pension scheme by 2018. The Government-led initiative was launched in October 2012 to boost the number of Britons saving into a pension, and ensure they have enough cash in retirement to maintain a comfortable standard of living.
It is the most efficient way to provide a personal income in retirement, as every contribution made by the individual is matched by their employer and topped up with tax relief by HMRC.
Thanks to the continued rollout of auto-enrolment, and the media surrounding recent pensions freedom measures which allow pension savers to access their pots at retirement, according to the ONS knowledge surrounding "workplace pension reforms" has increased substantially.
As well as workplace pension schemes, Brits consider investing in property as a safe way to fund retirement, and revealed that they consider it the best method to make the most from their money. While property is certainly the largest investment many people will make, and should be considered as a holding in their portfolio when considering asset allocation, it is not risk free.
Just as the stock market can rise and fall, so too can the property market, as many homeowners found to their detriment in 2008 during the recession. Many part of the UK outside of London and the South East have yet to see property prices rise to above pre-recession levels.
When Will You Claim Your State Pension?
Newly appointed pensions minister Ros Altmann has announced she will launch a review into the State Pension age in the next two years. Currently the State Pension age is 65 for men. State Pension age for women is gradually increasing from 60 to 65 by November 2018. State Pension age for both men and women will then increase to 66 by October 2020 and after that to 68 in the following years.
Altmann said in her maiden speech to the House of Lords last week: “The current State Pension system is, one of the most complex in the world. State Pension provision has undermined private pension saving, as too many pensioners just ended up on means-tested benefits that penalised their private income.
“Rising longevity means that successive generations are spending longer in retirement. This is, of course, pretty good news. However there are also huge cost implications for state pensions, which is why we will have an independent review of the state pension age by 2017. I want the review to consider not only rising life expectancy but also wider social, occupational and gender factors.”
Joanne Livingstone, Principal at pensions consultancy Punter Southall said that the logical conclusion of Altmann’s speech could result in a higher State Pension Age for women than men if gender is considered as a specific factor in isolation.
“However, if the proposal is that gender is instead seen as a proxy for other factors such as relative income levels, those men on lower incomes might similarly and justifiably expect a downwards adjustment to their State Pension Age,” she added.
