Savers who want to retire at 65 will need to “bridge the gap” created by the increasing state pension age and gender equalisation to ensure a comfortable retirement, according research from Aegon.
On average, an individual aged 60 on 6 December 2018 would have to save an extra £138.79 per month to replace the amount which they would no longer receive from the state (£8,546) between the age of 65 and their new state pension age (66).
Aegon pensions director, Steven Cameron commented: “With the new pension freedoms, people are increasingly personalising how and when they take a retirement income from their workplace and personal pensions.
“However, there’s no ability to take your state pension early and the age it can be taken is starting this month to go up to 66 with further increases to 67 and 68 due in coming years.”
Aegon’s research revealed that 670,000 people each year will have to wait longer for their state pension, and that 40 per cent of those surveyed did not believe that they should be forced to work longer to reflect improvements in life expectancy.
The state pension age for individuals aged between 46-55 on 6 December 2018 will be 67, meaning they will have to bridge a gap of £17,092.
For those aged 50 this will require saving an extra £85.90 per month, and those aged 55 it would require saving an extra £133.76 per month.
Individuals aged 40-45 would need to plug a gap of £25,638, as they state pension age is propsed to increase to 68, and would have to save £71.64-£93.04 respectively.
Cameron added: “These figures are an indication of what it will cost solely to replace state pension between age 65 and the new state pension age.”
The increased saving requirement is due to both the equalisation of the state pension age for men and women and the gradual increase of the state pension age due to longer life expectancy. The state pension currently pays out £8,546 per year.
Cameron concluded: “While the state pension on its own won’t provide a luxury retirement, for many people it’s a significant part of their retirement income. Many may feel they can’t afford to retire until it kicks in, which could mean working longer as state pension age rises.”
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