Bad News – You’re Probably Not Saving Enough for Your Retirement
The Centre for Social Justice has proposed raising the state pension age to 75 from 2035. Although the government has rejected the idea, the proposal shows that there is rising concern that people might not be saving enough for their retirement as life expectancy increases.
The state pension age of 65 is already going up from 65 to 66 next year, to 67 in 2026 and to 68 between 2044 and 2046.
When the state pension age of 65 was introduced in the 1940s, life expectancy was just 66. However, nowadays, men and women can expect to live into their 80s or longer, and pensions are not keeping up with the rising cost of an ageing population.
Who does the issue affect?
The problem affects people in the 30 years and below, especially women, renters and the self-employed. The Resolution Foundation says a third of millennials will be renting all their lives. Therefore, young people also need to save enough to continue paying rent into their 80s and beyond.
Many women decide to work part-time in order to take care of children and to save on childcare costs. However, this means their pension contributions will decrease or even stop altogether, which will make it even harder to increase their retirement savings.
The Office for National Statistics states that only 14% of self-employed people pay into a pension scheme and research by investment firm Fidelity shows that two-thirds of 23-38-year-olds, who work for themselves, do not have any form of pension.
As a result, Scottish Widows say that one in five of those earning between £10,000 and £20,000 per year might never be in a position to retire.
What does the future hold?
Hilary Hall, NHF/NBF chief executive, said, “Even if they have a pension in place, they are planning to delay retirement for as long as possible to keep earning. Unless they can increase their pension savings, the reality is that many people in our industry will be working well past the age of 65.”