TEENAGERS and young Brits in their early twenties can expect to work to age 70, as the state pension age rises to cope with longer lifespans and to keep costs down.
The state pension scheme is likely to change during your working life. But how does it work and how old will you be when you retire? Here’s what you need to know.
Teenagers and Brits in their early twenties can expect to work to age 70
What is the state pension age today?
The state pension age stands at 65 for men and 64 for women today.
It will keep steadily rising every few months to reach 65 for both men and women in November 2018.
The official retirement age will go up to 66 in 2020, 67 by 2028 and 68 by 2037.
And you can check using the state pension calculator as to when the changes will come into effect for your birth date.
How is it going to change during my working life?
No official data detailing the exact dates for rises in state pension age between 2037 and 2039 has been released yet.
But pensions ministers have said we should spend around a third of our life in retirement. Over the long term, life expectancy has tended to rise by three years each decade.
This means that, if this pattern continues, and the state pension is payable for a third of your life, it will need to rise by one year each decade.
According to figures from Hargreaves Lansdown, this means that the state pension age might rise again to 69 by the time those aged between 23 to 32 today reach retirement
While today’s 18 to 22-year-olds might have to wait until they are 70 to finally get a break from work.
How to start saving for your state pension early
HERE are some tips from Sarah Coles, a personal finance analyst, for Hargreaves Lansdown
- Keep a spending diary. If you can’t imagine being able to afford to pay into a pension, keep a diary of what you spend.
This will help you spot where your money is going and how to free up some cash for your pension each month.
- Cut your bills. By shopping around for gas and electricity, your mobile and media, you may well be able to free up cash to put into a pension each month – without giving up anything you love.
- Take full advantage of your workplace pension. The rules mean that if you pay into a pension, your employer has to pay in too.
Check what’s on offer on top of the minimums, because sometimes if you can manage to pay in a little extra, your employer will offer to pay more in too.
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What about personal pensions?
Personal pensions are pensions that you arrange youself. You choose the provider and make arrangements for your contributions to be paid.
If you haven’t got a workplace pension, getting a personal pension could be a good way of saving for retirement.
Sadly, the age you will be able to withdraw your personal pension has been hedging for a while too.
The earliest you can withdraw personal pensions rose from age 50 to 55 in 2010, and the Treasury has proposed that it should rise to 57 by 2028 – although this has not been passed into legislation yet.
Am I on track for a comfortable pension?
If you are only putting in the minimum amount for your workplace pension then you are not saving enough for a comfortable pension. Here's how much you'll need according to consumer group Which?
- Which? reckon that you need to be saving £131 into your pension a month from age 20 to be able to have a comfortable pension
- Anyone over 30 would have to save up to £198 a month.
- If you start as late as 50 you need to be saving a staggering £633 a month to be able to have a £26,000 a year income when you retire.
- These figures are assuming that your employer pays his or her part of your pension contributions.
- You will also receive a state pension depending on how much national insurance you have paid over your working life, the maximum amount you can receive is £164.35 a week.
The Treasury also suggested that this might continue rising – to be 10 years behind the state pension age.
This would mean 18 to 22-year olds might not get their personal pension until they are 60, according to Hargreaves Lansdown.
While someone aged between 23 to 32 will not have access to its pension pot until he or she turns 59.
How to start saving for your pension early?
Of course, you can retire earlier if you have enough savings.
Eight out of 10 people – or about 80 per cent – are unsure about how much they should be saving for later life, according to a survey by the Pensions and Lifetime Savings Association (PLSA).
This means about 30.4 million working age people are at risk of not saving enough to afford the comfortable lifestyle of their dreams once they retire.
Sarah Coles, a personal finance analyst, for Hargreaves Lansdown said: “If you want the freedom to give up work before you’re too old to enjoy life, it means doing everything you can now to save into a pension of your own.
“Save whatever you can afford, as soon as you can and it’ll make a big difference – hopefully it’ll mean you won’t have to wait until you’re 70 to finally get a break from work.”
Eight out of 10 people are unsure about how much they should be saving for later life, according to a survey by the Pensions and Lifetime Savings Association[/caption]
Research by Which? found that on average retired couples need around 18,000 a year to cover food, utilities, transport and housing costs.
This rises to £26,000 for couples who want to be able to go on holiday and take part in other leisure activities.
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To be able to have an income of £26,000 a year, as a couple you will probably need about £210,000 saved up as well as your state pension before you stop working.
It may feel like feels like making payday stretch until the end of the month is an almost impossible task, but there are ways of making it work without having to take out a second job.
Here’s how to save more than £10,ooo a year while living payday to payday.
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