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Approximately six million people, who are currently aged between 39 and 47 will be affected by the changes to their pension.
Currently, men need to reach the age of 65 to be able to withdraw their State Pension, and women need to reach the age of 62. Anyone who still plans to retire earlier than 68 may consider choosing to increase their savings levels and using the flexibility of pension freedoms to plan how they can bridge the gap between when they’d like to retire and when the State Pension kicks in. This means that we can be in control of how we spend the latter years of our life, as long as we have set a financial pension plan in place before we reach the age of 55, when we can access our pot.
New legislation ensures that every national insurance contributor is now auto-enrolled into a pension scheme. This means that when you retire, you will get both the State Pension (that you contribute towards through National Insurance contributions) and your pension pot that you now contribute towards automatically. If you employ someone, even if it’s just one person, you may need to offer them a workplace pension.
It is a good time for people to start taking control of their own pension plans and consider all of the options available to them.
When discussing the pension age rise, you’ll often hear people complaining that we will work until we drop. There are also some people who have no intention of retiring, but very few people will tell you they have their pension all planned out. With so many changes happening, it’s worth finding out more about your pension and how recent changes might alter your plans for retirement.
I decided to look into the reason behind the argument. Most people ignore the reasons for increasing the pension age; that the current scheme could be way too expensive and outdated.
1960s baby boom means there are more people entering retirement with fewer workers born since then to pay for them, i.e. the taxpayers.
When the first contributory state pension was introduced in 1926, only a third of men and 40% of women were expected to live to see their 65th birthday. The retirement age has not kept pace with longer life expectancy. People are living longer and therefore need pensions for longer. Someone retiring in their sixties could now spend almost a third of their lives in retirement and drawing a state pension. Whether they are fit to work in their mid-60s is dependant, in part, of course, on their line of work.
Raising the age at which both men and women can draw their state pension and the abolition of the Default Retirement Age (DRA) at which workers can be forced to retire, could be a clear way of resolving the issues. But shouldn’t we be able to enjoy our life after work for as long as possible and are we actually in more financial control of our pension plans than ever before?
What will retirement mean for future generations?
Blog written by: Leigh David, Reward Recruitment Consultant at Williams Kent Ltd
1st March 2018
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