The full new state pension is worth £11,502 per year
By Temi Laleye
Published: 12/05/2024
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Britons risk a £35,000 shortfall in their state pension if they can’t continue working right up until their state pension age.
Britons are living longer lives, but not necessarily healthier ones and this creates “hidden horrors for our retirement planning,” an expert has warned.
Healthy life expectancy is less than 63 years old for both men and women – a full three years less than the current state pension age of 66, according to recent Government data.
This raises the very real prospect of people being too ill to work but too young to get their state pension.
The full new state pension is worth £11,502 per year.
This would give a gap of almost £35,000 for someone needing to fill the three-year gap today, and even more, if they add in the annual increases from the triple lock.
Britons can save into other vehicles to bridge the gap and make sure early ill health does not derail their retirement plans; however, they must ensure they start planning for these alternatives as early as possible.
Morrissey said: “You can draw an income from your self-invested personal pension (SIPP), personal or workplace pension from the age of 55 (going up to 57 in 2028) so this could really help bridge the gap during those years.
“However, with state pension age on the rise it needs careful planning to make sure you don’t run out of money.
their workplace pensions for longer.
“These larger pensions over time will lead to better retirement incomes that should make up some of the gap.”
When people pay into their workplace pensions, they will benefit from the Government's tax relief, and in some cases, employers will match one’s contributions.
Morrisey added: “The so-called employer match. It’s well worth checking to see if your employer does this as it can lead to a significant uplift to your contributions without necessarily much extra coming from you.”
The retirement analyst urged Britons to increase their pension contributions whenever they can. For example, when they get a pay rise or a new job.
This can be a “great way” of boosting their pension relatively painlessly.
Britons might not get employer contributions to an ISA as they would a pension, but they can still build up a decent amount over the long term and any income can be taken tax-free.
A Lifetime ISA will also attract a Government bonus of 25 per cent on contributions up to £4,000 per year which can significantly boost their savings.
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However, they also need to be aware that they must access their Lifetime ISA for reasons other than purchasing a first home or before age 60, then they will be subject to a 25 per cent penalty.
The new state pension rates for 2024/25 will be:
