State pension: Will I still be working at 71?

As with all investing, your capital is at risk. The value of your portfolio with Moneyfarm can go down as well as up and you may get back less than you invest. Tax treatment depends on your individual circumstances and may be subject to change in the future.

There’s been a lot of talk about the state pension this week after research published over the weekend suggested millions of Brits may still be working at the age of 71. 

Les Mayhew of the International Longevity Centre, who conducted the research, said in the report: “In the UK, state pension age would need to be 70 or 71 compared with 66 now, to maintain the status quo of the number of workers per state pensioner. But if you bring preventable ill health into the equation, that would have to increase even more.” 

Figures from the Office of National Statistics (ONS) show that only half of Brits by age 70 are free from disability, meaning working beyond that age will become almost an impossibility for many. With many more people becoming economically inactive during their later years, coupled with a smaller number of people economically active in the UK, this makes it all the more difficult to maintain the current state pension model in future years.

Is the state pension currently sustainable? 

According to research in the Times, in two years the projected cost of the state pension will exceed the annual day-to-day budgets for defence, education and the Home Office combined (where ‘day-to-day’ refers to annual departmental expenditure excluding capital projects). Currently, that amount sits at around £125bn per year, according to the Office for Budget Responsibility. 

With successive governments having committed to maintaining the ‘triple lock’ for pension savers, this means that cost is likely to increase year-on-year under the current model. The triple lock ties it to the highest of the average UK income, inflation and a minimum increase of 2.5% per year, even if earnings and inflation are lower.  

For a number of years now, commentators have pointed towards the state pension system being deeply flawed and the need for it to change in the future, including many who predict it won’t exist at all for generations to come. 

The importance of private pension provision

All this makes planning for a future without relying on the state pension all the more important for savers of all ages. By starting to save early, you can take advantage of greater compound interest rates over the duration of your working life. Plus, adding to a private pension pot should provide many benefits, helping you to achieve a more comfortable life after work, including:

• Flexibility and control: Private pensions offer more flexibility and control over how retirement savings are invested and managed compared to workplace pensions. Individuals can choose from various investment options based on their risk tolerance, investment goals, and retirement timeline.
• Tax advantages: Contributions to private pensions are eligible for tax relief, meaning individuals receive tax relief on the contributions they make. 
• Employer contributions: Many employers in the UK offer workplace pension schemes where they contribute to their employees’ pensions. Taking advantage of employer contributions can significantly boost your retirement savings.
• Long-term financial security: Opening a private pension helps you to secure your financial future by building a nest egg to support you throughout retirement. It provides peace of mind knowing that there are additional funds available to cover living expenses and enjoy life after leaving the workforce.

Thinking of transferring or opening a pension with us?

Investing your retirement savings with a partner you can trust is key to effective retirement planning. With the right partner by your side, you can prepare to enjoy the retirement you deserve with total peace of mind. So why should you choose Moneyfarm?

Opening a pension with Moneyfarm is quick and easy. You’ll enjoy a wide range of benefits when you start saving for your retirement with us, too, including:

• Tax efficiency – Get up to 25% boost to your pension, without making a claim to HMRC. You may be entitled to more or less than this amount, subject to your tax status.
• Enjoy free drawdown – Access to free drawdown begins at age 55, allowing you to withdraw up to 25% of your pension tax-free, either as a lump sum or in instalments. Your pension funds can also be passed on to your beneficiaries without incurring inheritance tax, all at no cost to you.
• An investment plan uniquely tailored to you – We design all of our pension portfolios around your needs and circumstances. Simply tell us your retirement plans and we’ll carefully manage your savings to meet your goals, including helping shape your risk exposure over time so you can enjoy peace of mind as you’re getting ready to retire. 
• Your savings, simplified – Enjoy consolidated growth opportunities for potentially higher returns by combining your pensions all in one place. Easily track all your pension activity and performance through our easy-to-use app or online.

If you are considering transferring your pension to Moneyfarm, you must check your existing pension for any guaranteed benefits or penalties before you transfer. Visit our Transfer Considerations Page for more information.

You can find the full details of Moneyfarm’s pension schemes, including how you can open a private pension in just minutes, on our dedicated page here. 

If you’d like help consolidating your pensions, opening a new pension or have any questions, you can book an appointment with a member of our consultancy team who’ll help you achieve the retirement you deserve with Moneyfarm.