One in four people is expected to be aged 65 and over by 2050, according to figures from the Office for National Statistics (ONS). But faced with the very real prospect of spending 30 years in retirement, savers neeed to consider how they are going to fund their life after work.
“With the UK’s population ageing, more needs to be done to help guide UK retirees on the range of financial options available to them,” says David Burrowes, chairman of the Equity Release Council.
With life expectancy increasing and fewer children being born, the UK's demographics are shifting. The ONS forecasts that within 50 years, there will be an additional 8.2 million people aged 65 and over in the UK - a population roughly the size of London today.
The Centre for Social Justice (CSJ) last week suggested raising the state pension age to 75 by 2035 - rather than the current plan to increase it to age 68 by 2039.
But such a move could throw the retirement plans of thousands of people into turmoil. Steven Cameron, pensions director at Aegon says that “people need to know now so they can manage their expectations accordingly.”
One thing which is clear is that retirees are going to have to make their money last longer.
5 Tips to Boost Your Retirement Income
Up Your Pension Contributions
Under auto-enrolment, most workers will now be contributing a minimum of 8% of their salary into a pension (3% of which is paid by their employer), but experts say this is not enough. The more money you pay into your pension and the earlier you start, the more it has the chance to grow.
The best time to increase your contributions is just after you've had a pay rise, before you get used to have the extra money each month. Savers who contribute an extra 1% of their salary to their pension pot could retire with almost £60,000 more than they might otherwise, according to figures from Fidelity.
Track Down Old Pension Pots
These days it's entirely likely that an individual will have 11 different jobs through their working life, so it's not surprising that many savers lose track of old pension pots when they switch employers. Currently there is an eye-watering £400 million estimated to be languishing in unclaimed pension savings.
Keeping all of your retirement savings in one place makes it easier to track your progress and monitor your investments, and could help your money grow faster. You can find old pension pots using the Government's free Pension Tracing Service.
Take Control of Your Investments
When you join a workplace pension your money is typically put into a "default" fund, which is a fund invested in a mix of assets which changes as you grow older. Usually a greater proportion of your money is moved into fixed income assets, which may be less volatile, as you get closer to retirement age. But if you really want to supersize your retirement savings, you might want to choose your own investments. Check which funds are available through your workplace scheme and pick the ones best suited to your own needs and risk appetite.
Consider a Sipp
A self-invested personal pension (Sipp) is the ultimate way to take charge of your investments. You can open these accounts through a fund supermarket and cherry pick the funds, trusts or stocks in which you want to invest.
These may be a good option for self-employed workers who don't get contributions from an employer, and also for employees who may have maxed out their workplace contributions or can't get access to the investments they want through their workplace scheme.
Speak to a Financial Adviser
A financial adviser can help when it comes to planning for your financial future: they can help you assess what sort of lifestyle you want in retirement and how much you will need to save in order to achieve it. An adviser can also help you understand all of your options, whether it's deciding between an annuity or drawdown when you reach retirement or working out whether you should transfer from a defined benefit to defined contribution scheme.
