Every payslip you receive, a proportion is taken off for National Insurance, with part of that going towards your state pension, but when do you get to see the rewards of that money?
That time seems to be slipping further into the distance as state pension age gets later and later. For many years the age people retired was 65 for men and 60 for women, but with life expectancy constantly on the rise, plans have been put in place to steadily increase the state pension age to 68 for both men and women over the next four decades. There is also talk of linking state pension age to life expectancy, meaning it will likely reach the age of 70 for many.
But many people feel this is simply too late and research from PwC shows that 80% of those surveyed are hoping to retire before they reach 67, the planned state pension age by 2028.
PwC reveal that a rigid state pension system doesn't provide the flexibility people want and need, with consumers wanting more choice as to when they can draw their state pension, even if it means cutting the weekly amount they receive.
They suggest getting rid of the single state pension age and instead introducing a state pension 'window'. People would then be able to choose when they receive state pension between a range of ages, and receive an adjusted amount for the life of their pension, based on their chosen start date.
With the Budget 2014 announcements handing much more control over to pensioners to make decisions on how they use their pension savings and opening up more options than just buying an annuity, PwC feel a change to the state system would be the final stage in giving 'freedom and choice in pensions.'
The research found that four in ten people would make use of greater flexibility around when they can take their pension and one in four say they would opt to retire earlier than the fixed pension age. Only 9% say the age at which they receive their state pension is not an important factor when deciding what age to retire.
Nearly half (47%) of the people who want to receive their state pension earlier would be prepared to take a cut of more than £450 a year for the life of their state pension for being able to take it one year earlier – based on a single state pension value of £144 a week.
The main reasons consumers would like to reduce their hours, or give up work early, is to pursue other interests and spend time with their family but one in five people say their job is too demanding to carry on working to the qualifying state pension age.
Richard Eagling , Head of Pensions at Moneyfacts said:
"When you can receive your state pension often dictates when you are able to retire so the idea of introducing a state pension window, increasing the range of ages at which this money can be accessed, seems like a sensible proposal. The Government has shown a willingness to improve flexibility where private pension provision is concerned, now it should follow this strategy through with state pensions. Creating a state pension window would help to facilitate the increasing desire of many individuals to move into retirement gradually and support the trend towards part-time pensioners."
Many people will be reliant on the state pension as part, or perhaps all, of their retirement income, but it is also extremely important to consider saving for a personal pension as soon as possible. With auto-enrolment well underway, hopefully many people will be benefitting from workplace pensions and, particularly if you are self-employed, you may consider paying into a personal pension. Ensure you consider all your options including ISAs, which make a great tax efficient home for hard-earned savings and take a look at our retirement guides for more information.
Make the most of your retirement income be sure to shop around to get a better annuity rate
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