Retirees will need £84,000 extra if state pension age rises to 75 to avoid poverty in old age
RETIREES will need to save an extra £84,000 if the state pension age rises to 75 in order to avoid poverty as they grow old.
The Centre for Social Justice (CSJ) argued this week that the state pension age should rise to 70 by 2028 and to 75 by 2035.
The think tank reckons this would boost the economy by keeping older generations in work for longer.
But pensions experts say it would push many of those who are already failing to save enough for their retirement into poverty, while some would never even retire due to varied life expectancy.
Exactly what age you'll receive your state pension depends on when you're born though, so here we explain what applies to you.
Research by insurer Royal London has found that a worker on average earnings would need a pension pot of £260,000 at retirement to maintain their standard of living.
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DON'T know where to start? Here are some tips from Aviva on how to get going.
- Understand where you start: Before you consider your plans for tomorrow, you'll need to understand where you stand today. Look into your current pension savings and policy and research when you’ll be eligible for the state pension, and how much support you’ll receive.
- Take advantage of your workplace pension: All employers are legally required to provide a workplace pension. If you save, your employer must contribute too.
- Track down your pensions: If you've moved jobs a lot, this means you'll have several pension pots. It can be hard to keep track of them all, but the government offers to help you.
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- Find out if your workplace offers advice: Many employers offer sessions with financial advisers to help you plan for your future retirement.
This assumes that they will receive a state pension, currently £8,767 a year, at the age of 65.
To avoid having to work for another decade if the state pension age rises to 75, you would need an additional £84,000 in your pension pot, Royal London said.
This would be to pay for a ten-year annuity from the age of 65, which provides a regular retirement income as well as a "maturity amount" at the end of the specified period.
Steve Webb, director of policy at Royal London, said: "An increase of roughly a decade in state pension age means that those who want to stop work at 65 would now need to save an extra £84,000 compared with their previous plans.
"Given that the current target of a £260,000 pension pot is proving challenging for many people, having to save an extra third is likely to be unrealistic.
";The days of retiring in your mid 60s are likely to be a thing of the past if these proposals were to go ahead.
"Raising the state pension age to 75 by the mid 2030s would be a very aggressive and unnecessary timetable.
"There are parts of the country where the average person does not even reach the age of 75 and so would never receive a state pension despite a lifetime of contributions.
"In reality, millions of people will struggle to do part-time work at best in their early 70s and their income will be well short of what they need until the state pension kicks in."
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