How to avoid working for ever- Pension Planning UK

[arjay]

From the UK's Daily Telegraph, this article gives dates/ages at which UK nationals can expect to retire and the timing of the planned changes in the Retirement age. - Of particular interest to those not yet close to retirement age.

How to avoid working for ever

http://uk.finance.yahoo.com/news/How-av ... lkd28-?x=0
Rosie Murray-West, 16:33, Monday 28 March 2011

Retiring at 65 or younger will soon be just a dream for many unless they save to cover the gap as the state pension age rises.

Retirement is changing. Buried in the Chancellor's comments last Wednesday was an innocuous little line saying that the Government would seek "a more automatic mechanism" for increasing the state pension age by linking it to life expectancy.

In practice, this means that many workers will have to delay their retirement until they are 70 or even older, or save far harder to cover the gap left by the lack of a state pension.

Steven Baxter, a longevity consultant at actuaries Club Vita, said he expected that people who were currently in their thirties could be 71 or older before they received their state pension. "Pension age will rise at a much faster rate than people had envisaged," he said after the Government's announcement. "Without this, we risk pensions becoming more unaffordable."

Ros Altmann, the director general of Saga and a pensions expert, said we should welcome the change. "Once you are over 65 you may not be able to climb up chimneys or dance on treetops, but you can still work," she said. "This makes a lot of sense. It's a social revolution, if we want it to be."

For those who must plan their retirement around the new rules, however, an increase in the state pension age will raise as many questions as it answers. If they want to retire earlier, how will the later state pension age affect them, and will this finally break the link between state pension age and the age at which most people bow out of the workplace?

The default retirement age is being abolished from October this year, which provides an impetus towards people working longer. But older people still do not have the same flexible working rights as those with young children, meaning that some could be faced with the unpalatable choice of working full-time in a physically demanding job until they are 70 or not having enough money to live on.

"The danger is that we replace reliance on the state pension with reliance on disability benefits, because people are not able to work," said Mr Baxter. He estimated that, if the Government made good on its plan to link life expectancy and the state pension age, we could be drawing our state pensions at 68 by 2028. Those who are now in their forties should expect to retire at between 69 and 70, while those currently in their twenties should expect to retire later than 71.

"We need to say to the Government that they must keep an eye on 'healthy life expectancy', not just life expectancy itself," he said. He added that the life expectancy gap between the rich and poor in Britain had widened. For example, the average man in London can expect to live almost 10 years longer than the average man in Glasgow, meaning that you could end up with a situation in which the average man in some areas and income brackets would hardly receive any state pension at all.

Laith Khalaf, a pensions expert at Hargreaves Lansdown, said many people would still want to retire before the later state pension ages kicked in. "Already people are relying less on state pensions because they know that the goalposts can be moved," he said. Ms Altmann agreed. "People will be able to judge for themselves when they should retire," she said. "There is a whole new phase of life waiting for us."

Mr Khalaf said the cost of not receiving the state pension for extra years would have to be covered by earlier pension saving. To build up five years' worth of state pension (assumed to be £140 a week) at age 65, to cover five years of retirement before the state pension kicked in at 70, a 30-year-old would need to save £60 a month.

To build up seven years' worth, a 30-year-old would need to save £85 a month, if the state pension were not awarded until 72. These figures assume 6pc investment growth after charges and 2.5pc inflation.

Longevity is also having an effect on the cost of buying an annuity, which is the way most people fund their retirement through their pension. Annuities provide a lifetime income in return for a large proportion of your pension pot. Mr Baxter said savers needed to put an extra £1,000 every year into their pensions just to mitigate the rising cost of annuities caused by people living longer.

WHAT CAN YOU DO NOW?

The first thing to do is work out what you already have. You'll be able to get a state pension forecast from the Government and you can also get a forecast for any occupational pensions you have. Think about how life expectancy will affect you when you retire. The rule of thumb is that life expectancy is increasing by between two and two-and-a-half years every decade at present.

Unless you have a final salary pension, you may well need to buy an annuity with your pension pot. You can find out roughly how much your pension pot will buy you by using an online annuity calculator such as Hargreaves Lansdown's. Bear in mind, however, that unless you are close to retirement now, annuity rates will not be as attractive when you come to buy.

Do not underestimate the amount you need to salt away to build a decent pension pot. A 35-year-old will need to save 32pc of their wage in order to receive a retirement income of two thirds of their salary at 65.

PLAN AN EXIT STRATEGY

Ms Altmann suggested that people approaching retirement began talking with their employers, discussing the pros and cons of flexible working. Be realistic about whether you will be able to work in your industry and, if not, start thinking of other skills you might be able to use to generate an income.

Clive Bolton of Aviva (LSE: AV.L - news) , the insurance company, said many people chose to "downshift" their career in their later working life. "Does your job allow you to work fewer days or shorter hours? If not, you may want to think about how you can switch careers, which may involve getting new qualifications or retraining," he said.

= What is your retirement date? =

The state pension age for men is now 65. On April 6 last year, the female state pension age started to catch up. Proposals to lift the age to 66 by April 2020 are not yet law and need parliamentary approval. All men and women under 56 will have to wait at least until they are 66 before they can take their state pension.

• Born before April 6 1953? You are unaffected by the change in state pension age. The last woman to retire at 60 has already done so. Between now and 2016 the retirement age for women will rise to about 63. Between 2016 and 2018 it will rise to 65.

• Born before December 6 1953? If you are a man, you will be unaffected by the change to state pension age. If you are a woman, you will see a delay of about two months before you can claim your pension.

• If you are a woman born between April 6 1953 and April 5 1954, you will see a delay before you can claim your state pension. This will depend on your exact date of birth, but will range from two months, if you were born between April 6 and May 6 1953, to two years if born between March 6 and April 5 1954. For details of your exact circumstances, see www.direct.gov.uk .

• If you are a woman born between April 6 1954 and April 5 1959 you will receive your state pension on your 66th birthday.

• If you were born after this, you will be affected by further changes to the pension age.

The current law already provides for the state pension age to increase to:

67 between 2034 and 2036

68 between 2044 and 2046

However, the Government is considering how the state pension age should be changed in the future. This may mean that the timetable for increases to 67 and 68 will be revised.

There is a pension age calculator on the DirectGov website at www.tinyurl.com/2vtw6wc .

[trubrit]

Yes , not that it involves me now ,but I do wonder whether the private pension providers will also jump on the same bandwagon?

[harmonyudon]

Yes , not that it involves me now ,but I do wonder whether the private pension providers will also jump on the same bandwagon?

The private pensioners equalize the retirement age. The premium drops.
This is the case in NL. Earlier retirement, up to you awaiting the government pension. lower private pension ofcourse.

[socksy]

Working forever or never.

Learn from bastards like these

Here’s how a doctor explains it:

A woman in her late 20's came to the hospital today with her 8th pregnancy
She said to me me "My mum told me that I am the breadwinner for the family."
I asked her to explain. She said that she can make babies and babies get money from the State for the family.
It goes like this:
The Grandma calls the Department for work and pensions, and states that the unemployed daughter is not capable of caring for all of her kids. DWP agrees, and tells her the children will need to go into foster care.
The Grandma then volunteers to be the foster parent, and receives a cheque for £700 per child each month.
Total yearly income:
£58,800 soon to become £67200 when the 8th one is born, tax-free and nobody has to go to work!
In fact, they get more if there is no husband/father/man in the home! The brother does not count.
Not to mention free dental treatment, free housing, free council tax free school dinners, free tuition fees at college or Uni, free eyecare and glasses, free prescriptions and various other benefits...
Total value of all benefits combined probably approaching £100,000 per annum which would require an income of around £148000 to create.

That's about my salary as a senior consultant with years of experience and surgical skills in a central London teaching hospital.

Indeed, Grandma was correct that her fertile daughter is the "breadwinner" for the family.

This is how the politicians spend our taxes. When this generous programme was invented in the '60s, the Great Society architects forgot to craft an end date... and now we are hopelessly overrun with people who vote only for those who will continue to keep them on the dole.....

No wonder our country is broke!
Worse, our Muslim brothers have been paying attention, and by mandating that each Muslim family have eleven children, they will soon replace the voting bloc above and can be running this country.
Are we alarmed yet, is anybody listening?

Sincerely,
Sebastian J. Ciancino - Urologist,
Guys Hospital trust - London

Don't forget to pay your taxes!!
There are a lot of “breadwinners” depending on you!

Well? Is anybody listening??
Do we all have to wait for someone to translate this into Australian?

[jackspratt]

Ya' just gotta' love urban legends, and the gullible that swallow them hook, line and sinker.

http://www.snopes.com/politics/taxes/breadwinner.asp

http://www.factcheck.org/2010/12/fostering-a-fortune/

[Jello]

The letter definitely illustrates a point, but has been proven a hoax.
http://researchbriefings.files.parliame ... N06317.pdf

These welfare systems need to be monitored better to prevent abuse like this. But I think there are many more people who actually need the help than those that abuse the system.

[socksy]

Well I must be really gullible in thinking that there are very few who abuse the system in the UK including those born and bred there. Never mind I'll keep paying the tax on my pension to make sure the sponging bastards get more than their fair share whilst the elderly pensioners whov'e worked all their lives including my parents have to watch the coffers every month. Effing disgracefu

[noosard]

Australia a few years back had a kiwi expat living near Byron Bay who had 6 wifes or so and maybe up to 20 kids dependant
None were working and he was raking in 1000 a week or so
Will try to find article on this was on Sixty minutes I think

[DRILLER]

indeed many have short memories.

only a mere 40 years ago the single parent benefits didnt exist. kids in institutions being abused by preists, nuns, politicians, celebrities, public servants charged with 'caring' for them etc etc & at much more cost to the taxpayer as they also had to maintain the decrepit institutions where the abuse was occuring.

mothers in womens shelters.

fathers & husbands going on their merry way making more tragic outcomes never looking back at the carnage.

come on short memry people, wake up! its about the kids!!

[FrazeeDK]

back to the original topic.. How to avoid working forever..? a younger person needs to start planning and saving in their 20's.. If they do that and ensure that every pay raise isn't seen as an automatic jump to a higher more expensive lifestyle, then by the time they get to retirement age, the government social pension will just be gravy on the beef...
All said, though, most younger people today live for now and don't give two hoots about 40 years down the road.

[SJP17]

The place I am working has a several guys over the retirement age , 1 who is 66 just had a severe stroke and most likely will not be back at work, another guy who is 64 just got diagnosed with bowel cancer which has now spread quite badly so he is in chemo treatment at the moment.

After seeing whats happened to those boys I am even more determined to get out as soon as possible , hopefully by 60 ill be done with work for companies, then I can do things the way I want to do them