Following the Government’s decision to increase state pension age as high as age 68 in the future, many people who have no retirement savings and are hoping to rely on state benefits will find their income in retirement fall as low as 21% of their pre-retirement earnings. Take a man currently aged 27, classified as earning an average salary of £25,800 per annum. His state pension age will be 68. If this person retires at 68 and has no additional retirement savings, they will retire on 34% of their pre-retirement income, or £170 per week in state benefits. If this man chose to defer retirement until age 79, he would receive 66%, or two-thirds of pre-retirement income, through annual increases to state benefits because they have been deferred.
Andrew Tully, senior pensions policy manager, Standard Life said: “These figures paint a stark picture of retirement reality for many people in the UK today. The holy grail of retirement saving is to fund an income worth two-thirds of your pre-retirement income. If people rely on the state in the hope or belief that the Government will bail them out, they will either have to retire on a basic income or simply face the music and defer retirement until much later.
“Most people in the UK would like to retire at age 65 or even earlier. To achieve this goal with a decent retirement income, private saving is essential. The old adage of it pays to start saving early has never been truer.”
