Retiring at 70 can boost pension income by two-thirds: Aegon

People considering retiring could add around £46,388 to their pension savings if they delay taking their pension by five years, according to new research from Aegon.

Related topics:  Retirement
Rozi Jones
30th May 2017
Pension clock money retirement
"For some, the decision to work on past ‘traditional’ retirement age will be a lifestyle choice, but for others an inadequate pension pot may make it a necessity."

This means a 65 year old could increase their monthly income from £457 to £771 per month if they defer retirement and keep contributing to their personal or workplace pension until age 70. Those who delay by 3 years to age 68 can build up an extra £25,542, increasing their monthly income by £164.

Aegon research showed that on average, those between ages 55 and 64 contributing to a pension were paying £355 a month and had a fund of £105,496.

Based on this, those with a fund of £105,496 at age 65 who keep contributing £355 a month could boost their retirement income by up to 67% by delaying retirement for five years and increasing their pot to £151,884.

In the last 30 years the employment rate for people aged 65 and over has doubled from 4.9 to 10.2% as people work on into older age.

A quarter of working age people now expect to continue working full-time for as long as they are able, and a further quarter expect to work on past state pension age on a part time basis. Just one in ten (12%) will cease work immediately upon reaching state pension age, and fewer than one in ten (9%) will stop working pre-retirement.

The younger working population are particularly comfortable with the idea that work will not end at age 65. Nearly a third (31%) of millennials expect they will work full-time for as long as they are able, 27% will continue working part time and just 3% expect to stop working upon reaching state pension age

Steven Cameron, Pensions Director at Aegon said: “Those of working age today are waking up to the likelihood they’ll not retire at as early an age as their parents, and are no longer picturing state pension age as the defining ‘retirement moment’ at which they automatically leave the workforce. For some, the decision to work on past ‘traditional’ retirement age will be a lifestyle choice, but for others an inadequate pension pot may make it a necessity.

“The positive news or silver lining as some may see it, is that working a few years longer and keeping saving in a pension can dramatically improve retirement incomes. An individual with an average retirement pot making the average level of contributions could see their private or workplace pension income increase by two thirds if they defer retirement for 5 years. This is a result of the triple boost of continued investment growth on the pension fund, further contributions being added and ultimately fewer years to spread the fund over once no longer working.

“For those early on in their working lives, starting saving as soon as possible is key. But we can’t turn back time and those approaching traditional retirement age with less than they might wish for still have choices. For those who are able, continuing to work for a few years more not only keeps a salary coming, it can also produce a substantial uplift in retirement income. Planning a retirement income and when to start taking it requires careful consideration and we recommend speaking with a financial adviser who can offer tailored advice to meet your personal needs and circumstances.”

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