You may have seen the recent headlines that you will now be waiting longer for pension payout and therefore delaying your retirement. Let me explain what’s happened and why the headlines, whilst not quite fake news are certainly misleading!
This is all to do with the age at which we all receive the State Pension. This is the pension provided by the government to everyone who has paid National Insurance for the required number of years (now 35 years).
Up until a few years ago the age at which you received your State Pension was pretty clear, 65 for men and 60 for women. But then it became obvious we were all living longer than expected and therefore more and more people were starting to receive the State Pension. You see the State Pension is not pre-funded. Your National Insurance contributions do not go into a big pot that funds your future pension income. No, instead the National Insurance contributions you make today go directly towards paying for today’s State Pensioners.
In 1908 when the State Pension was first introduced you were only expected to live around 9 years once you started to receive your State Pension. Now when you receive your State Pension you are expected to live around 20 years on average, more than double the time! Up until recently there were around 3 workers paying National Insurance contributions for every State Pensioner (the old age dependency ratio). Without any changes to the State Pension age this would change to 2 workers for every pensioner by 2037. So it’s pretty clear the age has to change.
Will you be waiting longer for pension payout?
So who does this affect? Well up until recently the State Pension age was intended to increase to age 68 between 2044 and 2046. This is now being brought forward to 2037 to 2039. So people who are not 67 before this date will have to wait another year before collecting their State Pension.
Why you don’t have to be concerned about waiting longer for pension payout
The headlines have focused on people having to work longer before they can retire but this is simply not true. You are in control of your own destiny! Remember the State Pension is only one element of your retirement planning and once you have paid your National Insurance contributions (you can check how much your State Pension could be worth here) you have no control over this. What you can control are the following:
- Saving into your own or workplace pension.
- Investments, perhaps a stocks and shares ISA.
- Property portfolio.
- Cash savings in the bank.
With the right financial plan a 47 year old today still has plenty of time to save, invest and retire at an age much earlier than 68. Therefore it’s not true that this change to the State Pension age means you HAVE to work longer, you can retire whenever you want but the time to start planning is now!
If you would like some help understanding exactly when you can retire then we are currently offering a FREE financial plan forecast demo. Please get in touch with us here to book a session.