Retiring early is better than latte
Saving the £2.40 a day that you may otherwise spend on a latte and putting that money into your pension could let you retire earlier. Andrew Partridge reports Many people in the UK face the prospect of having to work until later into their lives after the Government’s recent Pensions White Paper said that the State pension age for a 35 year old will rise from 65 to 67, while a 20 year old will have to wait until age 68 to claim State pension benefits.
However, new research from Aegon UK has said that it’s still possible for people to avoid working longer, simply by saving an extra £2.40 a day into a private pension, the equivalent of the cost of a daily latte.
It said that an extra £2.40 per day pension contribution could allow a 35 year old earning £23,000 a year to reach a pension of half their final salary at age 65 rather than age 67, ignoring State pensions. And a 20 year old could retire three years before their State pension age of 68, with an extra contribution of £1.68 per day.
Aegon UK stresses that even though State pensions will be paid later, private pensions don’t have to be. Steven Cameron, head of business regulation, says: “With all the talk of having to wait longer for State pension benefits it’s easy to forget there are other options which would allow people to bridge the gap.
“People have a choice in how they manage their personal savings gap and for many, saving more will be an attractive alternative to working longer.”
The Government is currently in the process of building support for its pensions proposals, and is attempting to build a cross party consensus on its plans in parliament.
John Hutton, Secretary of State for work and pensions, recently urged Parliament to support its plans. He says: “Last month’s White Paper set out the radical changes we intend to make to our pensions system over the next few years. Taken together I believe the reforms can set the future direction for pensions in this country.”
John Hutton and James Purnell, Minister for Pensions Reform, have had a number of meetings with members of the opposition and civil servants have talked them through the detail of the White Paper.