A new survey has confirmed what many people have previously feared, that they will have to work longer before they retire.
The research, conducted by the Association of Consulting Actuaries (ACA), found that over 50% of small and medium sized companies expect that by 2028, 25% of their workers to retire at age 70 or over, with working past the age of 68 becoming the norm.
Dramatic changes are also expected sooner, with two thirds of companies expecting people to retire at 67, or later, by the end of this decade.
These predictions represent a huge change to retirement ages; at present the companies surveyed said that 90% of men retire at age 65, or earlier.
The actual date when people retire is often driven by when their State Pension will start, as many retirees need this income to meet day to day living costs, which cannot be covered by their own private, or work place pensions.
However, many employers are expecting their employees to delay retirement even though they could be receiving the State Pension, which is not slated to start to rise until 2018.
Why are people having to work longer?
Financial experts believe that there are a number of reasons why people are choosing, or indeed, having, to work longer.
Firstly, many people have simply made insufficient provision during their working life to fund a comfortable retirement.
The ACA research found that less than 60% of eligible employees were members of work place pensions. This figure was down on previous years with cost being cited as the main issue, although alternative calls on income, “disillusionment with pensions” and a “lack of interest” were also factors.
Secondly, Annuity rates have fallen significantly, meaning that would-be retirees are getting less income from their pension fund that would have been the case in previous years. A recent survey by MGM Advantage has shown that Annuity rates have fallen by 7% over the past three months and by around 20% over the past three years.
Thirdly, the cost of living has increased significantly over the past few years, which means for some, retirement, often on a lower income, is not viable.
Finally, a number of people have not been able to repay their Interest Only mortgages, which in some cases has meant people have had to continue to work past their normal retirement age, to try and reduce their debt levels.
Work place pensions
The research, and the fact people are having to work longer, emphasises the importance of people making provision for their retirement.
Cost is often cited as an issue, which makes work place pensions, where an employer will make a contribution, even more valuable.
It is hoped that the introduction of Auto Enrolment, which started this month, will help to increase the number of people in work place pensions, although many experts, including Steve Webb, the Pensions Minister, have warned that some people, particularly those with above average pay, will have to make additional provision if they are to have a comfortable retirement.
Our team of Independent Financial Advisers in Nottingham are experienced in developing retirement income strategies for clients the length and breadth of the UK. If you are approaching retirement and would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email firstname.lastname@example.org