But with such an uncertain economy, it may not come as a shock that over half of people planning to retire this year would consider, or have already considered, working past the state pension age.
Is retirement really an option?
A survey conducted by Prudential shows a shift in attitude that could see potential retirees becoming unwilling to take the leap. Part-time jobs, changing job or delaying retirement plans has become more common. The Express reports that 20% of those approaching retirement are hoping to start a new business or make money from a hobby. With online retail outlets such as Etsy and Not on the High Street opening up commercial opportunities, this should come as no surprise.
But what has caused this shift in attitude? Retirement should be a fairly stable time for your finances, but Brexit, government and corporate cutbacks, and shifts in the way that pensions are paid out have increased worries over the stability of our pensions.
Recent pension changes
At the moment you can have access to your pension balance when you reach the age of 55, despite the fact that the state pension age has recently been increased to 68. However, the Telegraph reports that this change only affects those in their late 30s and early 40s. While you might not want to retire in your mid 50s, you may want to access some of that cash to help your children buy their first home or fund their wedding. Depending on your circumstances, this type of gesture could leave you in a sticky financial position during your twilight years. It could be part of the reason that so many potential retirees are refusing to give up work.
How does this affect me?
As reported by the Guardian, 7 million Britons born between 1970 and 1978 might end up losing nearly £10,000 of their pension because of the new state retirement age. The move will save the government £74 billion, but many feel that these savings are coming directly out of their pockets. So how can you future-proof your pension fund?
How can I plan for the future?
Fully understanding your finances will put you in the best place to be able to live a comfortable and care-free life after retirement. However, there are a number of things you will need to consider to avoid disappointments:
Although it can differ between providers, it can take anywhere between 4 to 12 weeks from your last contribution to receive your state pension payouts. Making sure that you have savings or a buffer of available cash to help you with any mortgage payments, bills and day to day living, so that you’re not caught out by missed payments and any associated charges.
You may wish to take your state pension as a virtually tax-free lump sum. Although this can seem like an attractive proposition it can also be incredibly complicated to do and it’s best to seek financial advice before making the decision. You will be left with a reduced retirement income and if it isn’t managed properly you could run into problems later on. With life expectancy still increasing, you may be tempted to dip into the pot too much at the beginning of your retirement.
It may sound strange, but the place you live can have a bearing on how much you receive during your retirement. The Guardian highlights the different life expectancies across areas of the UK, which mean that some people could end up claiming more. For example, if you’re an average man in Dorset, you’re expected to live until almost 83, claiming around £124,000 pension as well as £3,000 of winter fuel bonus and a free TV licence. However the average man in Glasgow is expected to live to just 72, receiving only £38,000 pension along with £800 winter fuel allowance and no free TV licence.
Compare your retirement options
While a lump sum at 55 can be tempting, make sure you take the time to think about your options and how you will survive financially for the rest of your life. If you’re over 55 and looking to borrow money, you may be able to get some good rates, particularly if you own your own home and have good credit. If you’ve taken out your pension early, you could consider using your pension pot to invest in new peer to peer loan schemes, such as business loans at Funding Circle, or short term loans from Money Platform.
Sarah joined Choose Wisely in July 2017, whilst still studying for her degree. Learning the ropes across different departments in the business including Customer Service Advisor for a period of time- making her the company’s closest link to their consumers experience with their finances.