Research announced this week stated that the retirement age for middle-aged workers which is anyone born after April 1970 may have to rise until age 71.
Firstly am I middle-aged? F*ck
But I understand this. More of us are living longer after our working life and there is a falling birth rate. The state pension is paid by those who are working through national insurance contributions which because of these two factors is in decline as a percentage of what’s needed.
And that leaves the government with two choices. Either they raise taxes, or we are forced to wait for our pension. Neither sounds like it’ll work in our favour.
And let’s not forget, that the state pension and private pension ages are linked. If the state pension age rises to 71, then the private pension and workplace pension withdrawal age could increase to 61.
Who’s to blame for the increasing retirement age?
Through absolutely no fault of your own, you may not be able to count on the state pension the way your parents did. Even just a few years back there was talk about making the state pension means tested. So those who’ve diligently saved and invested their way through life and paid into the state pension would be disadvantaged.
The thing here though is that this is just research and nothing will happen as an immediate result. But the government have been talking about this and pension ages are only going one way.
Pension rules indeed change at the discretion of the government and they’re completely out of your and my control.
Look, I’ll be honest. No one knows what can happen to the state pension 30 years from now but rarely do systematic changes work in your favour.
Because of this, there are certain actions you can take now so it’s a lesser concern later on
Assume it’s not going to exist
This is my plan. I’ve built my finances in retirement to remove the need for the state pension. I’ve paid my dues to receive it and whatever we get and when is not planned into my strategy. It’ll be a bonus at most.
Now this won’t be for everyone. You need to have your plan nailed and done so over the long term. But for those who are working towards an early retirement, this is in your grasp.
Bridging the gap
The second is to bridge the gap. There are few people I speak to who want to work until the state pension age. Yet unless you can fund the gap between your retirement date and the time you can draw down your private pension funds, then you’ll need to work.
Contributing to a Stocks and Shares ISA that can be withdrawn from at any age is a great option. Setting up a lifestyle side hustle or investing in property are other opportunities you can focus on as well.
When it comes to pensions, most people ask me what I’m doing. Well go back and watch the video again, because it’s all right here.
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