Private pensions boosted as life expectancy soars


28 Aug, 2017

Private pensions boosted as life expectancy soars

Working an extra five years after retirement age could give a £50,000 boost to pension pots, research shows.

Data analysis indicates that for those in good health, it pays to remain in employment, with retirement incomes boosted by two-thirds.

Those who have built up a private savings fund of £105,496 by paying in £355 a month by the age of 65 can buy an allowance to give them a monthly pension of £457, according to data prepared for insurer Aegon.

Three additional years could see the pot grow by £25,542, giving them an extra £164 a month based on investment growth of 4%.

If able-bodied people kept at it for an additional five years, the value of their funds would reach £151,884, making a monthly pension of £771.

Senior consultant at Barnett Waddingham, Malcolm McLean said: “Provided the mental and physical capacity is there, it makes sense to work for longer to get the best deal. With life expectancy rising there is still plenty of time to enjoy returns. These days employers can’t throw people out on account of their age, so I would recommend it.”

Official statistics show that the employment rate for people over 65 has more than doubled, from 4.9% to 10.2%, in the 30 years to 2015. This figure is expected to continue rising, with life expectancy sky-rocketing and pressure on savings increasing due to record low interest rates and rising inflation.

This idea comes as the age at which the state pension can be drawn is rising. Between October 2018 and October 2020, the pension age for both men and women will rise to 66.

Former Pensions Minister Baroness Altmann said: “Even working for one or two years extra can make a significant difference.

"If you are able to, your lifetime income will be higher, you will have more money to spend both now and in the future and the economy benefits. It used to be the case that people aged 60 or 65 were past it but these days people are simply not old like they used to be, so why should they write themselves off?

“Continuing in employment – even part-time – gives people something that stopping work would make them miss.”

Those in defined-benefit or final salary schemes can defer taking their pension.

Broadly speaking, private pension schemes will increase their pensions by between 6%-8% for every year that isn’t cashed in. On the other hand, state pensions only see this figure rise to 5.8% in the same as of April 2016.

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