Millions of people in the United Kingdom are going to find themselves working well into their eighties because they haven’t prepared and aren’t saving enough for retirement. For many, the dream of slowing down, cutting back on working hours and using their pension to increase their income is being condemned.

The former pensions minster, Sir Steve Webb, has advised that approximately four million people have been put into a false security because they are enrolled in employer’s pension schemes, which saves only the minimum, which is eight percent.

Every one percent extra added to the pension scheme can reduce the need to work by one year and enjoy a good standard of living in older years.  The problem for those who are choosing to draw their state pensions and use it to top up their salaries, which is allowing them to reduce their working hours, may find themselves unable to retire completely when they reach their late seventies or even older.

The positive news is that excessive working lives results in higher pension contributions. One percent of pension contribution rates can reduce a year of needing to work to enjoy a good retirement moving forward. Working harder now to achieve a decent pension is essential to have choices in older years to enable people to decide how and when they actually do retire.

The Mirage of Flexible Retirement, the report by Sir Steve Webb focuses on the age in which someone will need to continue working if they have saved into a legal minimum level pension scheme and wants to access their state pension as early as they can to cut down on working hours.

The report does look at gold standard retirement, which is income after retirement which is equal to two thirds of the pre-retirement levels. He also looks at silver standard retirement, when the pension is worth half of the persons final salary.

Based on the report, anyone who wants gold standard pension and they retire at a gradual rate will need to work until they are at least seventy nine years of age before they can afford to retire completely. Those who don’t touch their state pensions, which increases in payouts, and maintain full working hours are able to retire with confidence at the age of seventy four.

Those who are happy with the silver standard retirement and retire at a gradual rate will work until they are sixty nine, while those who don’t touch their state pension and work full time can retire at sixty eight.

The reality is that those who have targeted pensions that provide for a widow or widower and protect against inflation could see people working well into their eighties. Of course this comes with concerns regarding physical and health ability to work full or part time into older years.

It is not unusual for some people to live off their pensions for up to thirty years, which is approximately the same amount of time that someone will spend in work. The average rate of pay is £27,600 per annum and if you want to save an additional one percent, you are looking at an amount over £5,824, which is only £4 per week along with contributions by the employer and employee.

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