Why you'll be working until you're 71

If you want a decent pension when you retire, you'll be working into your 70s...

As my mother liked to say, what you want in life and what you get are two different things. Cheery I know, but where retirement is concerned, she definitely had a point.

When you want to retire, and when you can afford to retire, are two very different things.

The average age that Brits would like to retire is 58 years old, according to new research from Axa. I’d sign up for that. But dream on, because you and I know it isn’t going to happen.

The age we expect to be able to afford to retire is a more realistic 64 years old. As you can see, that’s a very different thing, six years different.

Sadly, the differences don’t end there. The average age the average person can actually afford to retire is even higher - 71 years old.

That means we will have to work for 13 more years than we want to, and seven years more than we expect.

I hope you like your job.

Work or die

Every few months, somebody produces new figures showing just how long we will have to go on working to avoid penury in retirement. The results are never pretty. Indeed, just last month came the news that Middle class pensioners are doomed!

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One minute you’re dreaming of retiring at 65, the next you’re facing another five or six years at the coal face.

As far as I can see it, we all have just three options.

1. Save like crazy. After a lifetime of making fat monthly pension and ISA contributions, you might just have built a large enough pot to retire while you’re young enough to enjoy it.

2.  Work until you drop. No pension worries if you drop dead at your desk!

3.  Retire early anyway, and hope to muddle through on the State Pension.

These are all tough options. As you can see, I’ve inherited my mother’s cheeriness.

The blame game

I’m only the messenger, so you can’t blame me. So who do we shoot?

Personally, I blame doctors and scientists. They keep finding new ways of making us live longer, and the longer we live, the more money we need to see us through retirement. Dang those scientists!

You could blame yourself. You want a long and healthy retirement, don’t you? Maybe 20 or 30 years of freedom? Did you expect somebody else to pay for it? Yes, I know you’ve paid your taxes, but you haven’t paid that much.

You can certainly blame the politicians. Over the last 15 years, MPs have voted to raid private and ravage State Pensions, while awarding themselves the most generous pensions in the world (and routinely fiddling their expenses, but let’s stick to the subject, shall we).

Finally, you can blame the bankers. Stock markets and annuity rates have tumbled since the credit crunch, and the average pension now buys 40% less annuity income than five years ago, Axa calculates.

Strangely enough, bankers are the only people whose pensions are so big they make MPs jealous. Where’s the justice?

Reasons to be cheerful

Don’t completely despair. The stock market recovery of the last 18 months has boosted the value of our pensions. In March 2009, the average person couldn’t afford to retire until around 76 years old, Axa calculates. Today, it is down to 71, which is progress. If the market recovery continues, that could fall further.

But only if you are actually saving in a pension.

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Another piece of good news is that the government remains committed to launching its flat rate £140 a week State Pension from 2015, and ditching the dreaded means test. This should grant everybody who qualifies a basic annual income of £7,280 a year, with any savings you have made yourself coming on top of that.

It’s the most exciting pension reform of my lifetime. And yes, I did use the word exciting.

Do these three things

Every time I urge people to save like crazy in a pension, I slightly hate myself. Because I know there are millions of people out there who can’t afford to pay today’s bills, let alone tomorrow’s pension.

If you can’t afford to save for your pension, there are still three things you can do.

1.  Make sure you qualify for the full basic State Pension. If you’re not sure where you stand, request a State Pension forecast today.

2.  If you’re in work, join your company pension scheme. If your employer doesn’t offer a pension now, it should do so after 2012, under the forthcoming auto-enrolment pension scheme. Don’t squander this opportunity.

3.  Clear your debts. You might just scrape by on a tiny pension, but you could sink if you have to service debts as well. Make sure you are on course to clear any mortgage, credit card, overdraft and personal loans before you hang up your boots.

Can save? Do save

If you can afford to save for a pension, are you doing so? If you’re not, there is only one logical explanation: you like working so much that you never want to give it up.

Is that true?

Does your boss like you so much he wants to see you creaking into work well into your 70s?

You better hope so.

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