Britons anticipate working more than five years past their desired retirement age, according to new research from the Standard Life Centre for the Future of Retirement. The study found that while workers ideally wish to retire around age 62, they expect to continue working until nearly 68.
This disparity is attributed to financial pressures and the increasing state pension age. The age at which individuals can claim their state pension began rising in April, moving from 66 to 67, and is projected to reach 68 between 2044 and 2046. Compounding these concerns, recent plans were announced to potentially alter the 'triple lock' system, which guarantees increases to the state pension.
Catherine Foot, director at the think tank, stated that the ideal retirement age has remained consistent, but the perceived reality of when individuals can stop working is shifting further away. She noted this trend occurs against a backdrop of strained household finances and global economic uncertainty, which collectively risk making retirement feel less attainable and more distant.
The research, which polled 6,000 Britons, revealed that nearly two-thirds of respondents worry they are not saving enough for retirement. Renters face a particularly large gap of 6.8 years between their desired and expected retirement ages, compared to 2.1 years for homeowners and 5.7 years for those with a mortgage. A gender divide also emerged, with women anticipating a 6.1-year gap and men a 4.5-year gap, potentially due to factors like the gender pay gap and career breaks for family care.
However, the report suggests that proactive planning can significantly narrow this retirement gap. Savers who engage in retirement planning experience a gap of just 2.5 years, contrasting with the 7.3-year gap for those who have not planned. Planning can involve increasing contributions to workplace or personal pensions and calculating necessary savings for a comfortable retirement at one's ideal age.
For instance, Standard Life calculations suggest an individual starting with a £30,000 salary at age 22, contributing 5% of their salary with a 3% employer match, could build a £252,000 pension pot by age 68, assuming salary growth and investment returns. If contributions were increased by three percentage points, this individual could potentially retire at age 62 with a £270,000 pot.
Foot emphasized that there is a clear link between planning and retirement expectations, even for those on lower incomes. Modest actions such as starting earlier, understanding existing savings, and increasing contributions where affordable can make a substantial difference in achieving desired retirement timelines. Employer pension schemes that match contributions offer a significant advantage, as do tax relief benefits, which can reduce the net cost of pension contributions for individuals.