A study carried out by insurers Royal London has suggested that UK workers will require a pension pot of ‘at least’ £260,000 to ensure a comfortable retirement.
In contrast, the total pension pot needed to secure an advantageous retirement in 2002 was £150,000, the study revealed.
It suggested that the increase can be partly attributed to lower interest rates and rising life expectancy.
Royal London also found that those renting could require a pension pot of £445,000 in order to ‘avoid a slump in living standards’ when they come to retire.
Commenting on the study, Helen Morrissey, Personal Finance Specialist at Royal London, said: ‘If our retirement pot is going to support us through a longer retirement and in an era of lower interest rates, we are going to need to build a much bigger pot than in the past.
‘For those unable to get onto the property ladder during their working life, a large private rental bill needs to be factored in to retirement planning.
‘We cannot afford to be complacent about current levels of retirement saving.’
The Institute of Directors (IoD) has urged the government to permit older individuals to withdraw money from their pension pots in order to fund a new business.
The business group is calling on the government to allow older people to make limited, tax-free withdrawals from their personal pension pots to finance start-ups. Such withdrawals would be in addition to the current 25% tax-free allowance.
A ‘shadow personal allowance’ could also be introduced, which would be offset against an individual’s income tax liability, the IoD said.
The lobby group is also urging the government to make the UK tax system ‘flexible’ to encourage workers to access different types of training over the course of their working life.
Commenting on the proposals, Lady Barbara Judge, Chairman of the IoD, said: ‘It is a cause for celebration that an increasing number of experienced workers are going it alone as entrepreneurs. They are people with wisdom, experience and good judgement, who can have many years of productive work ahead of them.
‘People in their sixties now are on the front line of the shifting boundaries between work and retirement. The government should consider introducing tax incentives to encourage people to pursue their ideas and invest in training, so that they can continue to have fulfilling working lives beyond the age expected by previous generations.’
A report published by the Institute for Fiscal Studies (IFS) has suggested that women aged between 60 and 62 have become ‘worse off’ as a result of the recent rise in the state pension age.
Between 2010 and 2016, the state pension age for women increased from age 60 to 63. The government intends to align the state pension age for women with the state pension age for men, which is currently age 65.
The report found that women between the ages of 60 and 62 have experienced a £32 reduction in their weekly household income since the change.
Poverty rates amongst women in this age group have risen ‘sharply’, the IFS suggested.
Jonathan Cribb, Senior Research Economist at the IFS, said: ‘The tax and benefit system is much more generous to those above the state pension age than those below it.
‘Since both rich and poor women are losing out by, on average, roughly similar amounts, the reform increases income poverty rates among households containing a woman who has reached age 60 but has not yet reached her state pension age.’
The government has announced that the rise in the state pension age from 67 to 68 will be phased in between 2037 and 2039, rather than between 2044 and 2046, as was previously planned.
The change could potentially save £74 billion by 2045/46, the government said.
Individuals born between 6 April 1970 and 5 April 1978 will be affected. The government stated that no one born on or before 5 April 1970 will see a change to their proposed state pension age.
David Gauke, Secretary of State for Work and Pensions, commented: ‘Since 1948, the state pension has been an important part of society, providing financial security to all in later life.
‘As life expectancy continues to rise and the number of people in receipt of state pension increases, we need to ensure that we have a fair and sustainable system that is reflective of modern life and protected for future generations.’
However, the Trades Union Congress (TUC) has warned that the state pension age is now higher than many individuals’ life expectancy.
Frances O’Grady, General Secretary of the TUC, stated: ‘A decent retirement is a right for us all, not a privilege for the few.
‘Rather than hiking the pension age, the government must do more for older workers who want to keep working and paying taxes. Workplaces and working patterns need to adapt to their needs.’
An analysis carried out by insurer Royal London has revealed that more than three million people employed by large businesses are failing to claim around £2 billion a year in additional pension contributions from their employer.
Many UK workers pay a standard percentage of their wage into a pension, and their employer contributes as well. Some large firms also offer to ‘match’ additional employee pension savings when they save more.
However, Royal London has found that many workers are unaware of this, and have therefore not taken advantage.
It calculated that around £2 billion in employer pension contributions could be available to employees if they choose to save to a maximum as opposed to a minimum.
Steve Webb, Director of Policy at Royal London, stated: ‘Millions of workers are missing out on ‘buy one, get one free’ money from their employer in the form of ‘matching’ pension contributions.
‘At a time when money is tight for many people and pay rises may be limited, getting your employer to contribute more to your pension can be a very cost-effective strategy.
‘When individuals are thinking about where to put their money to get the best return, the chance to more than double your money through an employer contribution and tax relief from the government takes a lot of beating.’
A report published by the World Economic Forum (WEF) has called for the retirement age in financially stable countries to rise to ‘at least 70’ by 2050, in line with increases in life expectancy.
The report revealed that babies born in 2017 can expect to live to at least 100 years old. As a result, it suggested that individuals in nations such as the UK, US, Canada and Japan may have to work until at least age 70. The UK state pension age is already set to rise from age 65 in 2018 to 68 by 2046.
Policymakers have been urged to consider a handful of key strategies in order to help alleviate the situation. Governments should encourage individuals to save regularly within savings products, and should also review their national retirement age.
The WEF also called for education systems to teach financial literacy.
Michael Drexler, Head of Financial and Infrastructure Systems at the WEF, commented: ‘The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change.
‘We must address it now or accept that its adverse consequences will haunt future generations, putting an impossible strain on our children and grandchildren.’
A new report published by the Resolution Foundation has suggested that workers in the UK are receiving ‘lower rates of pay’ as a result of higher pension deficit payments.
The report revealed that workers are unfairly losing an average of £200 a year, and that low paid and younger employees are the most affected by the loss – many of whom are not entitled to the pension pots they are plugging.
Older workers and those already in retirement ‘stand to gain the most from the plugging of gaps’, the Foundation stated in its report.
The think tank revealed that UK businesses spent around £24 billion trying to reduce their pension deficits in 2016.
Matt Whittaker, Chief Economist at the Resolution Foundation, said: ‘Our research shows for the first time that there is indeed a link between rising pension deficit payments since the turn of the century and reduced pay.
‘With average earnings still £16 a week below their pre-crisis peak and prospects for a return to strong pay growth looking shaky, it’s important that younger and low paid workers don’t take a hit to their pay because of deficit payments to pension schemes that they’re not even entitled to.’