Labour refuses to guarantee triple lock for pensions
The state pension will continue for as long as we do, unless some future politician does the unthinkable and scraps it. It may not be worth as much, though, if threats to scrap the triple lock off carried through.
While millions have a workplace and personal pension savings as well, there’s no guarantee they will be sufficient to last the course.
As people live longer, many could spend more than three decades in retirement. That means they have to save an awful lot of money while working, and too many of us don’t.
The task will get even harder due to volatile stock markets and stagnant earnings. Another issue is that millions are forced to stop working in their late 50s and early 60s, due to sickness or age discrimination, and can’t build more pension.
While we are living longer on average, we aren’t necessarily in better health. Medical advances may keep our creaking bodies going, but doctors can’t do much about our pensions. That’s down to us.
The longer we live, the longer the money will have to last. In many cases, sadly, it won’t, leading to later life hardship.
On Census Day in 2021, there were 13,924 centenarians living in England and Wales, up by 24.5 percent in a decade and a staggering 127-fold increase on 1921, when a mere 110 people made it to 100.
As many as one in five girls born today will live to be 100, and one in seven boys. This is good news in some ways but will also throw up plenty of financial challenges, warns Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.
It will put more pressure on the NHS and state pension, as a smaller number of workers will have to fund a rising band of sick and elderly.
While the state pension age is likely to rise higher, there’s only so far it can climb before most of us are too tired or unwell to carry on
While the auto-enrolment scheme is handing millions of employees company pensions for the first time, that won’t be enough on its own. Plus it doesn’t apply to the self-employed, who often have nothing.
It means that people must save more under their own steam and those nearing retirement need to handle their savings very carefully. The following steps may help your pension keep pace with you.
Make sure you get the full state pension. Men and women need 35 years of qualifying National Insurance contributions to claim the full new state pension, pay to those who retired from April 6, 2016. If you have not yet retired, visit Gov.uk/state-pension-forecast to see where you stand. Claiming NI credits could plug any shortfall.
Resist early pension withdrawals. Savers are free to start withdrawing money from pensions at age 55 but they should tread carefully, warns independent pensions expert Andrew Tully. “If you want your pension to last into your 90s, don’t take too much when still in your 50s.”
Check pension fund charges. The underlying charges on a pension scheme can roll up over the years and deplete your pot.
An annual charge of 1.5 percent a year may sound small but will eat up a quarter of your pension after 35 years, according to government website MoneyHelper.org.uk.
By comparison, a charge of 0.5 percent will only swallow a tenth of your pension over the same period. Consolidating your different pension pots on a low-charging platform can cut total charges
Draw up a budget. When you hit retirement, work out how much income you can generate from your pensions and other savings, and spend accordingly.
Work on if you can. While millions dream of an early retirement, don’t think you can afford to stop work at 55 or 60 if you might live to be 100. Even a part-time job could give your income a real boost. You can also defer taking your state pension and get more when you do finally claim it.
Consider buying an annuity. Most retirees now leave their pension funds invested to grow via drawdown, taking income as required. The danger is that you spend too much or stock markets crash, depleting your pot, Tully said. “Consider using some of your retirement funds to buy an annuity, as the income is guaranteed to last for as long as you do.”
It may be worth considering an inflation-linked annuity, which pay less income at first but this will rise every year to keep up with prices. That won’t happen with a level annuity.
However long you live, you want your pension to be with you all the way. Careful planning will help.
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