Britons Aim for 62 Retirement, Expect to Work Until 68: Study

Britons aspire to retire shortly after their 62nd birthday but anticipate working approximately five years longer, until nearly age 68, according to a study by the Standard Life Centre for the Future of Retirement. The research, which polled 6,000 individuals, highlights a substantial disparity between retirement aspirations and financial realities, influenced by economic pressures and the increasing state pension age.

The state pension age began a phased increase in April, moving from 66 to 67, and is projected to reach 68 between 2044 and 2046. This shift comes amid discussions of potential changes to the state pension's generosity, with the Prime Minister having recently signaled plans to potentially move away from the "triple lock" system.

Catherine Foot, director at the think tank, noted that while the ideal retirement age has remained constant, the anticipated working age is receding. "This is happening as the state pension age itself begins its phased rise from 66 to 67, and against a backdrop of renewed pressure on household finances and a wider sense of economic and global uncertainty," Foot stated. "Together, these factors risk making retirement feel less certain and more distant, rather than a milestone people can plan towards with confidence."

Financial concerns extend to savings, with nearly two-thirds of those surveyed expressing worry about insufficient retirement funds. The gap between expected and actual retirement ages is particularly pronounced for renters, standing at 6.8 years, compared to 2.1 years for homeowners and 5.7 years for those with a mortgage. A gender divide also exists, with women facing a 6.1-year gap and men a 4.5-year gap, attributed to factors such as the gender pay gap and career interruptions for family care.

To mitigate this gap, the study suggests proactive planning. Savers who engage in retirement planning experience a shorter gap of 2.5 years, contrasted with 7.3 years for those who have not planned. Planning can involve increasing contributions to workplace or personal pensions and calculating necessary savings for a desired retirement age.

For instance, Standard Life calculations suggest an individual starting at age 22 with a £30,000 salary could accumulate approximately £252,000 by age 68 with a 5% personal contribution and a 3% employer contribution, assuming annual salary growth of 3.5%, investment growth of 5%, and 2% inflation. However, increasing contributions by three percentage points could potentially enable retirement at age 62 with a £270,000 pot.

Foot emphasized the strong correlation between planning and retirement expectations, even for individuals with lower incomes. "Starting earlier, understanding what you already have and, where affordable, increasing pension contributions can make a meaningful difference," she said. "For many people, relatively modest action now could help bring the retirement they want considerably closer."

Employer matching schemes can significantly boost retirement savings, with some employers contributing up to a certain level to match employee contributions. Additionally, tax relief on pension contributions can enhance savings, with basic-rate taxpayers receiving 20% relief, higher-rate taxpayers 40%, and additional-rate taxpayers 45%. Contributions made through workplace pensions are often deducted before tax, reducing the immediate tax bill, while 'relief at source' systems allow individuals to claim back additional tax relief from HM Revenue and Customs.