Martin Lewis answers question about state pension
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Around 2.5million Britons have delayed their retirement so far. While some say they enjoy their jobs, two thirds cannot afford the loss of income with inflation so high, according to new research from Legal & General Retail.
Among those planning to delay, 1.7million expect to have to keep working indefinitely in either part-time or full-time roles.
The over-55s who are still in work plan to delay retirement by almost three years on average, while one in seven are looking for additional work to boost their income or because they fear losing their job in the recession.
Anna Thomas Sam, 56, works as an agency driver and reckons she still has at least 12 years of working life ahead of her.
She doesn’t expect to retire until at least 67, when her state pension kicks in, and may even press on to age 70 if fit enough.
“I’ve only got a couple of small pensions, so I won’t have the funds to retire early. Also, I think I’d get bored without having something to do.”
Anna, from Canterbury, is in reasonable health and counting her blessings. “I’ll carry on working for as long as I can.”
Gary Peart, 57, from Essex, had been planning to retire at 60 but now expects to work on until 62 or even later, after his retirement savings fell by 25 percent in this year’s global stock market crash.
His dreams of retiring in Spain are now on hold. “I’ll just work on in the hope of being able to retire when stock markets recover,” he says.
Planning retirement was tricky even before the cost of living crisis, and has only got harder, said Lorna Shah, managing director of retail retirement at Legal & General Retail. “While some choose to retire later because they enjoy their work, millions are making this decision based on necessity, rather than choice.”
Shah urged people to consider all their options before making a decision. “Make use of the free, impartial support available offered by the likes of MoneyHelper and Citizens Advice Bureau to understand your options.”
Government-backed MoneyHelper is also the gateway for free one-to-one retirement guidance for the over 50s via the Pension Wise service. Retirement income decisions are complex so do not be afraid to talk, Shah added. “If you are feeling overwhelmed or anxious about their retirement, call your pension provider.”
L&G runs a free online Reclaim Your Retirement hub and many other pension firms offer similar resources.
Shah said some workers may have more pension than they realise after losing track of forgotten pots from previous employment. There are an estimated 2.8 million unclaimed pension pots, totalling more than £26billion.
If you cannot find one or two of yours, The Pension Tracing Service can help you track them down for free. “Knowing where you stand will make planning easier,” she said.
Those approaching retirement also have to work out how to generate income from their pensions.
Most now chooise to leave their pension invested in the stock market and draw down cash as required. Others prefer to lock into the security of an annuity, which offers a guaranteed income for life.
Shah said: “There is no one hard and fast rule, a blended approach of both options might be most suitable.”
An option called a fixed-term annuity might suit those who want a guaranteed income for a shorter period. “This can help retirees bridge their income until another pension kicks in.”
One piece of good news is that annuity income has rocketed this year along with interest rates. Just 12 months ago a 65-year-old buying a single life level annuity with £100,000 would get around £4,800 in annual income, today they could get more than £7,000 a year.
There has also been a surge in the number of pensioners heading back to the workplace, a process known as an “unretirement”, according to latest figures from the Office for National Statistics.
“As prices surge, people need to earn some money,” said Tom Stevenson, investment director for Personal Investing at Fidelity International.
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