Work beyond 68 - your pension prospects

Posted on: 11 December 2013 by Andrew Stallard

George Osborne's Autumn Statement revealed that for low income households retirement age is actually State Pension age. If the state pension is a major part of your retirement income, you will have to work until 68 to get it.

State pension age increased to 68The Chancellor, George Osborne, and his Coalition team spent months preparing the Autumn Statement – and the Shadow Chancellor, Ed Balls, spent just as long preparing Labour’s response.

As the next General Election comes into view after the worst recession in living memory, the politicians were only too well aware that every trend, every change, every word and forecast would be examined in minute detail and dominate the media for the week to come.

But all that careful planning was blown away and the Chancellor’s statement relegated to secondary importance after the announcement of the passing of Nelson Mandela a few hours later on Thursday.

It was Conservative Prime Minister Harold MacMillan, in the 1950s, who is attributed to the quote “events, dear boy, events” in reply to the question about what is most likely to blow governments off course. MacMillan is more famous for his most people “have never had it so good” verdict, which continues to haunt the Tories to this day. (1)

Timing in financial planning, as in politics and life, can be everything – and the best-laid plans can go disrupted by factors way out of your control. Politicians have proved that with regular, and often seemingly unnecessary changes to the regulations, pensions, mortgages, and investments can be affected.

Your financial adviser will do his best to give advanced warning of changes, but so often – as was the case when Gordon Brown was Chancellor – the devil was in the detail. The headlines said one thing, the small print something slightly different.

There have certainly been previous occasions when George Osborne would have preferred the UK’s financial state to have been kept well away from the front pages. This time, without being bountiful, the news was better as a small surplus was predicted for 2018-19! Of course, he added “we will keep taking the difficult decisions” and “we will fix the roof while the sun is shining.” (2)

But, while the Chancellor talks about GDP, forecast, a cash surplus and quotes figures that are mind-boggling, all we are really interested in is how will this affect us and what impact will it have on our financial position. Very few citizens have every bought into the “we are all in this together” mantra when politicians start talking about “difficult decisions.”

The pension age was always going to be the main event. That was the thrust of most of the media coverage leading up to the Autumn Statement and it was clear journalists had been given their usual “steer” by the Treasury.

Osborne talked about linking “pension age with expectancy” and people spending “a third of their adult life in retirement” in his statement.

That’s a far cry from Germany’s Old Age and Disability Bill of 1889, which introduced an old-age pension for the first time, financed by a tax on German workers. This was introduced as part of Otto von Bismarck’s State Socialism welfare reform policies. Interestingly, that pension was provided for those who had reached the age of 70. It wasn’t reduced to 65 until 1916. At the time, the average life expectancy for the average Prussian was 45! (3)

In the UK, retirement age will increase to 68 sometime in the mid-2030’s (down from 2044-46). If the link to life expectancy is maintained, someone starting work now will have to wait until they are 72. However, 77 could be the retirement age for some born in 2013! (4)

Retirement age is actually now State Pension Age. Legislation has meant that most companies cannot force employees to retire at 65 as they once did. There is nothing to stop you working beyond State Pension age. (5)

But do you want to work that long? Are you able to work that long? Can you afford not to work that long?

It’s the last question that occupies more and more of our thinking and time - and is usually centre stage when predicting/planning our future with a financial adviser.

It wasn’t an issue when final salary schemes were the norm, but they are long gone for most people in the private sector. We have to make our own arrangements, and those choices are getting tougher and tougher.

 

For a free, no obligation initial chat about your individual finances, call us on 0800 0112825, e-mail info@wwfp.net or take a look at our website www.wwfp.net.

Sources:

  1. Harold MacMillan - Wikipedia
  2. Chancellor’s Autumn Statement
  3. State Socialism (Germany)
  4. BBC News – Autumn Statement
  5. GOV.UK – Retirement Age

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