The State Pension age will start climbing from today’s 66 to 67 in just five years, and it will continue rising after that. Millions face working until later in life unless they start building their own retirement savings today.
As Waspi women have learned to their cost, you cannot rely on the State Pension being there for you in retirement.
More than 3.5 million women born in the 1950s thought they would be free to retire at age 60, only to face working up to six years more to get their State Pension.
The State Pension age will soon rise higher for everybody, both for men and women. It has already been increased to age 66, and is due to climb again to 67 between 2026 and 2028.
That’s not the end of it. The State Pension age is set rise again to 68 between 2037 and 2039. Pretty much anyone under 40 will be affected by that.
Thereafter, it is likely to continue rising with life expectancy, said Tom Selby, senior analyst at AJ Bell. “Younger savers should plan assuming they might not get their State Pension until 70 or even beyond.”
Doubts over whether Chancellor Rishi Sunak will implement this year’s triple lock rise are adding to State Pension uncertainty.
Even when you do qualify, it isn’t riches. The new State Pension is just £179.60 a week, which adds up to just £9,339 a year. That’s roughly a third of the average full-time national salary, and you only get that if you qualify for the full amount.
Many will get much less, because they have not made the maximum 35 years of National Insurance contributions during their working lifetime.
Relying purely on the State Pension is risky.
The only way to choose when you retire and have enough money to enjoy your final years is to invest under your own steam.
Maike Currie, investment director at Fidelity International, said the triple lock is under review but whatever the Chancellor decides it makes sense to build your own nest egg.
Yet Fidelity’s research shows that almost three-quarters of over 55s either do not have enough for retirement, or have no idea how much they have. “They are leaving their later years in the hands of fate,” Currie said.
Younger people are in a similar position, as they struggle to save for a pension due to student debt, stagnating wages, and the cost of getting on the property ladder.
The pandemic has only made saving for retirement more difficult for everybody so what should you do?
The longer you have until retirement, the better, as time is on your side. Don’t waste it.
Leaving cash in a savings account will not help much, with best buy savings rates at around 0.5 percent while inflation races to three or four percent.
Investing in a personal pension is a better alternative, especially since you get tax relief on your contributions. So each £100 that goes into your pension only costs you £80 (or £60 if a higher rate 40 percent taxpayer).
You can invest in a mix of shares, cash, bonds and gold via a low-cost self invested personal pension, or SIPP.
Alternatively, use your tax-free Stocks and Shares Isa allowance. You can pay in up to £20,000 each year and all your money grows free of income tax and capital gains tax for life. Most investors pay in much smaller sums but it all adds up.
You can invest in low-cost SIPPs and Isas via a range of online platforms, including Aegon, AJ Bell, Canada Life, Hargreaves Lansdown, Interactive Investor and PensionBee.
If you invest regular sums, month after month, year after year, you may be surprised to see how much your savings grow.
This could also liberate you from State Pension age worries, no matter how long you have to wait to get your money.