New research has indicated that potential retirees could increase their pension savings by over £40,000 if they postpone by just five years.
The study from Aegon found that if a 65-year-old continued to pay into their pension until they were 70, their monthly income could grow to £771, up from £457 if they deferred for five years.
The data revealed that those aged between 55 and 64, on average, had a pension pot of £105,496 and were contributing £355 into their pension each month. If these payments continued to be made into a pension five years after the current retirement age was reached, this could boost the eventual size of the pot to £151,884, an increase of 67%.
As increasing numbers of people continue to work into old age, the employment rate for those over 65 has more than doubled over the past three decades – rising from 4.9% to 10.2%.
With just 12% of people claiming that they will stop working as soon as they hit the state pension age, the majority seem to expect that they’ll continue to work past retirement.
A quarter of those asked believes that they’ll work on a part-time basis after they reach retirement, with an additional quarter predicting that they’ll continue to work full time for as long as they can.
This proportion was also seen to increase as the age of the demographic fell. Whilst 27% of so-called millennials expect to be working part-time upon retirement, just under third (31%) predict that they’ll be working full time for as long as they are able. Only 3% believe that that they will cease work immediately after reaching the state pension age.
Commenting on the research was Steven Cameron. As well as highlighting the changes which pensions had undergone over recent years, the Pensions Director at Aegon drew attention to the financial positives that working longer could have.
“Those of working age today are waking up to the likelihood they’ll not retire at as early an age as their parents, and are no longer picturing state pension age as the defining ‘retirement moment’ at which they automatically leave the workforce. For some, the decision to work on past ‘traditional’ retirement age will be a lifestyle choice, but for others, an inadequate pension pot may make it a necessity.
“The positive news, or silver lining as some may see it, is that working a few years longer and keeping saving in a pension can dramatically improve retirement incomes. An individual with an average retirement pot making the average level of contributions could see their private or workplace pension income increase by two-thirds if they defer retirement for 5 years. This is a result of the triple boost of continued investment growth on the pension fund, further contributions being added and ultimately fewer years to spread the fund over once no longer working.
“For those early on in their working lives, starting saving as soon as possible is key. But we can’t turn back time and those approaching traditional retirement age with less than they might wish for still have choices. For those who are able, continuing to work for a few years more not only keeps a salary coming, it can also produce a substantial uplift in retirement income. Planning a retirement income and when to start taking it requires careful consideration and we recommend speaking with a financial adviser who can offer tailored advice to meet your personal needs and circumstances.”
