There will be lots of headlines today saying that we are all going to have to work longer following announcements made in the Autumn Statement yesterday, however this is not necessarily the case.
Changes had already been announced that will raise the State Pension Age (SPA) to 66 from 2020 and to 67 in 2028, with a further increase to 68 from 2046. George Osborne has announced that this increase in SPA will be brought forward to mid 2030’s with an additional increase to 69 on the cards in the mid 2040’s. Given this trend it is therefore likely that those in their 20’s today face the prospect of not accessing their State Pension until they are into their 70’s!
Whilst this may seem a bleak prospect, it is important to remember that these changes relate to the age at which people can access their State Pensions, not the age at which people can retire, in reality there is no minimum age for retirement, however very few people can afford to ‘retire’ in their 30’s for example, and so we work, typically until our 60’s and then we retire.
It is also worth considering here that the need for these changes is being driven partly by the fact that we are all living longer, Mr Osborne even stated today that the State Pension age ‘has to keep in line with life expectancy’.
How long we work is in fact optional and if you don’t fancy working into your late 60’s or early 70’s you are able to save money to provide you with an income in later life. Assuming you have saved enough and been disciplined with your investment behaviour, it is feasible that you won’t be at all reliant on the State Pension. If you are solely reliant on the State Pension for your retirement income then it is very likely that you will be required to work in to your late 60’s or early 70’s.
The key here is planning and the earlier this starts the better. Effective planning can help to put in place a retirement strategy that will build your wealth across a range of savings ‘vehicles’ including ISAs, pensions and possibly unit trusts, stocks and shares etc.
Combining these ‘vehicles’ and their relative tax advantages and investment flexibilities you will increase your chances of being in control of your retirement date and what your able to do when you have stopped working, rather than relying on a State Pension that is not likely to be sufficient to support your standard of living.
There is lots of criticism about pension savings but these criticisms are not always entirely justified. Used correctly and as part of an overall financial planning strategy pensions can provide you with the income you need to follow your dreams in retirement.
We are not saving enough for our retirement and failure to address this issue looks set to cause problems for many people, particularly in an ageing society.
Having a plan and sticking to it can be the difference between working into your 70’s or sitting back and relaxing. Even the Government has a plan and apparently that is working!