Qualified Financial Advisor
Born after 1961?
Be prepared to work for longer
We are all living longer and becoming a burden on the state.
A baby girl born today can expect to live to 94 years old; a 2017 baby boy’s life expectancy is 91 years. Based on today’s pension system, this means that as adults, they could easily have a retirement that lasts as long as their working life.
It obviously makes sense to increase the retirement age higher in line with life expectancy – but the reality of moving the State Pension age is more difficult.
Under current legislation, from January 2021 the state pension age for men and women will increase to 67. It will then rise to 68 on 1 January 2028. This means that people born in 1961 and later will lose two years pension money.
It is going to have a big financial impact for those workers who have to retire at age 65 but do not have sufficient savings to fund a number of years without state support.
Looking at the issue in purely financial terms, it can be argued the link between the rise in the State Pension age and longevity is fair. While seeking to ensure fairness between each generation, this had to be balanced with the rising cost to the public purse of supporting an aging population.
However, it is the Government’s responsibility to properly inform individuals of any changes which might affect them and advisers believe people need at least ten years notice of any change in order to be able to plan for it.
The old cliff edge of age 60 and 65 has been washed away. The world of the Third Age is now a very different one, in which those lucky enough to get the State Pension will on average spend almost a third of their adult life in retirement, a proportion never before reached.
Individuals who want to be in control of their own retirement need to save harder and for longer. That starts by making the best use of PRSA and pension allowances while they are still available.