How changes to the state pension are affecting retirement plans

A rising state pension age is having an impact on broader retirement plans.

New research by insurer Canada Life has found that changes to state pension legislation mean a quarter of homeowners over 40 say they will still retire at their state pension age.

However, 31% of respondents said they plan to continue working past their new state pension age, with this proportion rising to 50% of over 60s.

34% of over-60s who own homes say they plan to retire earlier than their state pension age, and 11% say they had already retired, before their state pension kicked in.

When asked about their expected primary source of retirement income, 28% of homeowners over 40 say they will rely on the state pension. This reliance on the state pension is despite a full basic pension only providing £179.60 a week, or £9,350 a year.

45% of those polled said their workplace pension would provide the bulk of their retirement income, with more men than women relying on this source.

11% say the bedrock of their retirement income will come from their personal pension.

When considering the sources of income being used for retirement planning, men and women both expect to rely on the state pension equally, but there is a clear gender gap emerging for other income sources.

For the workplace pension, 73% of men compared to 61% of women will incorporate this into their retirement income.

The gap is 30% for men and 22% for women for Individual Savings Accounts (ISAs), and 19% to 11% for financial investments.

The research also identified a lack of financial advice for the over 40s, with only 28% planning to meet with a financial adviser before making decisions about their pension income.

Andrew Tully, technical director at Canada Life, said:

“Many people are looking to rely on the state pension to provide them with income in retirement. However, the amount received is not generous by any standard and as a result the onus is on individuals to take personal responsibility to save for retirement. Employees can build on the state pension and any workplace savings they have. Self-employed people face more of a challenge as they don’t have an employer to help fund their retirement.

“As the goalposts for the state pension shift, it's vital people check their state pension age, the amount they are due to receive and whether they are eligible for the full state pension. It’s equally important that those who have spent time out of employment check their record, claim any National Insurance credits possible, and think about making any top-ups in order to be entitled to as much state pension as possible. Taking a proactive approach, seeking the help of an adviser and making good decisions now will all help to fund retirements.”

You might also be interested in:

Pensions
Watch out for this pension tax charge
Investments
Rising inflation could cost the Treasury dearly
Pensions
Tough choices for pensioners on State Pension Shortfall Day
Investments
September 2021 Investment & Economic Update