State pension age changes spark warning to prepare for ‘shortfall’ if you retire at 65 | Personal Finance | Finance
The next increase to the state pension age is scheduled to take place in stages between 2026 and 2028, when it will increase to 67. It will then go up again between 2044 and 2046, to 68.
Increasing the age by just a year can have a significant impact on a person’s retirement planning, and how much they will need to rely on other streams of income for their older years.
Becky O’Connor, director of Public Affairs at PensionBee, said Britons “have to decide” if they want to retire earlier than when they receive their state pension.
She told Express.co.uk: “The state pension delivers a maximum of roughly £10,000 a year. So if you still wanted to retire at 65 but won’t get the state pension until 68, you’d need at least an extra £30,000 in your pension to make up this shortfall.
“The Pensions and Lifetime Savings Association thinks you need around £12,800 a year for a minimum lifestyle in retirement and £23,300 for a moderate one, as a single person, to give you an idea of the total you might need for each year you are retired. You can see the difference the state pension makes to reaching these targets.”
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Research from the association found an individual would need £12,800 a year for a minimum standard of living in retirement.
This compares with £23,800 a year for those who want a moderate standard of living, while those who want enough funds for a comfortable retirement would need £37,300 a year, an increase of almost £4,000 compared to the requirements last year.
According to analysis from AJ Bell, a person who wants a minimum standard of living in retirement needs £52,000 in pension savings.
Mark Devlin, senior technical manager at M&G Wealth, said it is “essential” for people to have a clear plan for when they are going to retire.
She said: “Across England, the life expectancy for men was 79.4 years old between 2018 and 2020 and 83.1 years old for women.
“If the state pension age rises to 68, this gives at least a decade for the ‘average’ person to reasonably expect to receive it.
“But yes, there is clearly a higher risk that people won’t live long enough to receive it with each increase to the entitlement age, as long as life expectancy isn’t increasing.
“This is sadly particularly true for lower income people in regions where life expectancy has been wavering, including Scotland and the North of England.
“In Scotland, male life expectancy in 2018 to 2020 was 76.8 years old, down from 77 years old in 2015 to 2017.
“If this is the average life expectancy, then a higher number of people will also be dying younger than this, than previously.”