A recent study by the Standard Life Centre for the Future of Retirement reveals that while Britons aim to retire at 62, they anticipate working beyond that age by over five years. The research highlights a stark contrast between retirement aspirations and financial realities, driven by economic pressures and the increasing state pension age, which began rising again in April.
Starting this April, the state pension age has started climbing again, moving gradually from 66 to 67. The next increase, to 68, is set to occur between 2044 and 2046. These adjustments follow the government’s announcement to scrap the triple lock, which could reduce the benefits available to retirees.
Retirement Dreams and Reality
Catherine Foot, head of the research group, explains that while people’s preferred retirement age remains unchanged, the age at which they realistically believe they can stop working has shifted upward. This shift coincides with the steady rise in the state pension age and growing financial pressures, alongside broader economic instability.
Almost two in three of those polled worry they are not saving enough for retirement. Renters face an even larger gap between expectation and reality of 6.8 years, according to Standard Life. This is more than triple the 2.1-year gap for those who own their own home and an increase on the 5.7-year gap for people with a mortgage.
A significant gender difference also emerges, with women facing a 6.1-year gap compared to 4.5 years for men. This disparity stems from lower earnings for women and many taking career breaks to raise children, delaying their pension savings. However, there are strategies to strengthen retirement savings and bring retirement closer to the desired timeline.
Those who actively prepare for retirement see their gap shrink to just 2.5 years, while non-planners face a 7.3-year difference, the study finds. Effective planning might involve boosting contributions to workplace or personal pensions or calculating how much needs to be saved to retire comfortably at the preferred age.
Closing the Retirement Gap
A 22-year-old earning £30,000 could accumulate a £252,000 pension fund by 68, based on Standard Life’s projections. If they increased their contributions by three percentage points, they could retire at 62, their ideal age, with a £270,000 pot. Foot notes that the data highlights a strong link between planning and retirement expectations, even among lower-income earners.
If your employer offers to match your pension contributions, this can be a fast track to a richer retirement. Your employer must contribute a minimum of 3 per cent of your salary to your pension, but some schemes go beyond this and will match your contributions up to a certain level. Tax relief will also do a lot of the heavy lifting if you’re in a hurry to boost your savings.
Basic-rate taxpayers get 20 per cent tax relief on payments, while higher and additional-rate taxpayers get relief at 40 and 45 per cent respectively. If you are in a workplace pension, it’s likely your contributions will be deducted before tax is calculated, which means you save on your tax bill as you didn’t need to pay tax on the amount you put into your pension. The earlier you start planning, the better, as it can make a meaningful difference in achieving your retirement goals.
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