State pension age increases to 66 years’ old

It’s Official! From 6 October 2020 men and women in the UK will now have to wait until their 66th birthday to receive their state pension. UK residents born between 6 October 1954 and 5 April 1960 will now receive their state pension at the age of 66. For those born after 5 April 1960 there will be a gradual increase in the state pension age to 67, and then to 68 years old.  

This comes from the chancellor’s triple lock pledge; where the state pension increases each year along with inflation. Inflation is based upon average earnings, and prices. Another reason why this move was made was because of an increase in life expectancy. To receive the full amount of the state pension worth £175.20 per week you must have 35 qualifying years of national insurance contributions.

 

Young people need to plan ahead

We recommend young workers should plan ahead and think about their retirement options. It is looking very likely that the state pension age will continue to increase as life expectancy continues to rise. Young workers should accept they are unlikely to receive their state pension until at least the age of 70 years old. Start saving for retirement as early as possible to build a bigger pension pot to supplement the state pension or allow you to retire earlier.   

 

How to plan for retirement?

Everyone is different and will have different needs and ability to save, but as a start:

  • Be part of the company pension scheme
  • If Self-Employed, start your own pension
  • Clear debts – your income in retirement will be lower.
  • Have a plan!

 

What retirement lifestyle would you like?

Ask yourself the above question.  How much money per year will you need to accommodate your lifestyle during retirement?

The current full state pension is £9,100 per year (£175 per week).

Assuming you are debt-free, the below table gives you an idea of the income you will require to fund a particular lifestyle during retirement;

Lifestyle

Single

Couple

Minimum

£10,200 per year

£15,200 per year

Moderate

£20,200 per year

£29,100 per year

Comfortable

£33,000 per year

£47,500 per year

 

Minimum Lifestyle

A minimum lifestyle covers all your basic needs with a small amount of money left over for social occasions.  You would live a very basic lifestyle, not spending much on food or running a car and having one UK holiday each year.  Statistics show around 75% of employees achieve at least this standard of living during retirement.

If you are a couple, achieving a minimum retirement lifestyle is much easier, especially if you both can claim your full state pension.

For a single person, it will be more difficult to achieve a minimum lifestyle as your state pension is unlikely to be enough.  You will need something else to supplement your income.  

 

Moderate Lifestyle

To be more financially secure you will need to save for a moderate lifestyle. In a moderate retirement, you will be able to have more money for social occasions and you may be able to have one holiday abroad per year as well as run an older car.

A single person, receiving their state pension would need approximately £11,000 more per year. This figure is much the same for a couple if they both receive the full state pension. 

 

Comfortable Lifestyle

Being more financially secure and able to afford some luxuries requires you to aim for a comfortable lifestyle.  You will be able to afford luxuries such as holidays, change the car every few years and pay for additional extras such as subscription services. 

If you are single and receive the full state pension you will need an additional £24,000 per year. Couples who both receive a state pension will need an additional £29,500 per year. 

 

How can we help?

At Hawsons Wealth Management our team of financial advisors can help you prepare for the retirement you want. Our experts consider all retirement planning options and help you find the right retirement plan for you. This could include private pension plans and investment options. Our advice will be tailored to your individual circumstances to help you get the best retirement fund possible.

If you would like to discuss your retirement plan with us, please contact us for a free initial meeting.

If you would like to find out more about our personal pensions and retirement planning service, please visit our website here.

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Natasha Fathers, Senior Independent Financial Advisors

Natasha Fathers

Director of Hawsons Wealth Management Limited

0114 229 6557

[email protected]