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The Changing Face of Retirement in Britain

For many of us, the word “retirement” conjures up images of freedom. It opens up opportunities for international travel, the chance to take up new hobbies or spend more time with family, freed from the shackles of a full-time job.

No wonder that recent research by Aviva paints such a rosy picture, with 62% of retirees claiming that their experiences of retirement have beaten their expectations. Even more impressively 29% of the retirees surveyed claim retirement to be “much better” than they expected.

There’s more. While just 42% of the working population claims to feel “content” with their life, this number rises massively for retirees; 62% of whom experience contentment.

With all these enticing benefits its little surprise that research from Franklin Templeton suggests that 91% of us are looking forward to retiring.

According to the ONS many of are feeling bullish about our retirement planning, with over half of us (52%) feeling “very confident” or “fairly confident” that our pensions will provide the standards of care we expect in retirement. A similar number feel that they understand pensions well enough to make informed decisions about saving for retirement.

That’s all well and good, but the data suggests that the concept of retirement is changing rapidly. Furthermore, many people may be overly confident about being prepared for retirement. Firstly, thanks to increased life expectancy the age at which we will be able to draw our state pension is slipping ever upwards.

The state pension age is planned to increase to 66 by 2020, increasing another year by 2028. Even the government website, which allows you to check the date at which you can draw your pension, states that the pension age “is regularly reviewed and may change in the future” hinting at further increases. The Office for Budgetry Responsibility has forecast that the retirement age could rise to 70 by the year 2060.

Of course the above age refers only to the age at which we may draw our state pension.

When we can expect our pension funds to offer the type of lifestyle we expect in retirement?

Here, other studies paint a rather starker picture. For example mutual finance company Royal London recently examined the amount we need to save to reach a “gold standard” retirement fund – one defined as a pension capable of providing two thirds of your current income, corrected for inflation.

The study suggests that a 22 year-old worker making the minimum statutory contributions would currently need to work to 77 to reach gold standard. Understandably, those who get started later would need to work even longer. Starting at 35 you’d need to work till 79, and a 45 year-old worker would need to continue working until their 81st birthday.

Their experts suggest that you’d need to pay 20% of your entire salary into a pension in order to hit the “gold standard” by a more reasonable retirement age; something that very few of us are doing.

The Office of National Statistics recently asked a sample of the British population at what age they expect to retire. Over half of the population expect to retire between 65 and 69. The research suggests these individuals could be in for a nasty surprise if they expect to maintain a reasonable standard of living after leaving full-time employment.

Little wonder, then, that research by Canada Life found that 43% of us expect to continue working, at least on a part-time basis, upon reaching retirement age. Many people who have failed to properly prepare for retirement may even find themselves working “until they drop”.

With such a depressing outlook in retirement it’s all too easy to feel overwhelmed by the gargantuan task at hand. Which? found that 20% of the over 50’s have never checked their retirement accounts, while a further 21% of people admitted they wouldn’t even know how to check their expected entitlement.

The research paints a clear picture, however, that those that plan for retirement early generally enjoy their time that much more. Studies suggest that 66% of workers who had planned financially enjoyed a stress-free retirement; this is contrast to just 36% of retirees without firm plans.

Worryingly, data suggests that 54% of workers in their 40’s have yet to start planning for their retirement. Furthermore almost half of individuals in their 50’s have yet to start planning for retirement.

So what are we to do?

The first step is actively engaging in planning for retirement. Whether you’re in your twenties or your sixties, the sooner you can begin planning your financial arrangements the better off you’ll be.

Furthermore with lifespans increasing all the time – and with it the state retirement age – anyone hoping to retire early will need to seriously consider both their private pension options and how much they can afford to increase their contributions.

With changes in the economy, relying on the government to provide for you in old age may be a more risky more proposition than in the past. Increasingly, experts are recommending that we take individual responsibility for preparing for retirement if we are to live as comfortably as possible.

Image courtesy of AAG

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