The Impact of Pension Changes

We are in the era of pension freedoms where people aged 55 and over have more choice about how and when they take a retirement income from their workplace and personal pensions. 

However, there is no such flexibility when it comes to taking your State Pension early which is now payable from age 66 with further increases to 67 and 68 in the coming years.  This can force workers to delay their retirements, hitting middle-aged and female workers hardest. 

For someone aged 60, replacing the State Pension between 65 and 66 might cost £138.75 a month for five years, which, allowing for the tax relief bonus from the government, would mean a cut in monthly take-home pay of £111 (based on 20% tax relief).  Those currently aged 50 will now have to wait until age 67 to receive their State Pension.  For them, bridging the gap will cost £85.90 a month for 15 years (or a reduction of £68.72 take-home pay).

However, someone currently aged 40 need only contribute an additional £71.64 before tax relief each month demonstrating that where you can, starting to think about retirement early will make a difference to the overall amount you will need to bridge the gap.

These changes are will also hit female workers hard, with research from the Chartered Insurance Institute showing the average pension pot for a female worker in the UK is worth five times less that of a man, making it less likely that she can afford to retire before qualifying for the State Pension.

Female workers can be especially vulnerable to a longer wait for the State Pension, as they are less likely to choose the date of their retirement, with 62% finding themselves forced to retire earlier than planned due to the ill-health or to care for a family member.

With women accounting for only 24% of 40-79 year olds currently receiving professional financial advice, experts are calling for more women to take advantage of specialist advice in planning for retirement.   Women’s financial lives have often followed a different path and pace to men’s with factors such as maternity leave and part-time work and we can offer specialist advice for your pension and investment planning which takes this into account.

Whether it’s bridging the State Pension gap or longer-term retirement planning you are considering, why not get in touch to arrange a no-obligation appointment with us to review your options.  You can email us here or call our office on 0141 572 1340 and we'll get a meeting set up for you.