Work longer and boost your retirement income by a third

New study reveals that by simply delaying your retirement by five years you could significantly boost your retirement income.

Working for five years beyond the State Pension age could bump up the income you receive from your retirement savings by up to a third.

That’s according to a new report from Friends Life and the Pensions Policy Institute.

The study looked at the impact deferring your State Pension and continuing in full time work, contributing to a personal pension, could have on your income in retirement. For those with small pension pots, delaying your State Pension by five years would see the weekly pension income jump from £156.90 per week to £208.80 once they give up work.

Working for longer

Friends Life looked at how working for one additional year, three additional years and five additional years would affect the final weekly income from pension savings. The table below breaks that down, across a range of pension savers, from those with paltry pension savings at state retirement age to those with more healthy pots.

As you can see, putting in a few extra years at work can make a significant difference how much you get each week when you do finally pack work in for good.

Chris Curry, director of the Pensions Policy Institute, said that working beyond State Pension age offers “a real alternative to saving more or having a lower than ideal income in retirement”.

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We aren’t saving enough

Meanwhile, a report from the International Longevity Centre has concluded the UK needs a new, independent Pension Commission, warning that currently savers are unlikely to get the retirement incomes they need.

The ILC warns that savers face a ‘perfect storm’. Household debt to income is predicted to rise above its pre-financial crisis peak in 2018, while the savings ratio looks likely to fall to its lowest level since 1997. On top of that, people are living longer, so need to have savings that will last them over 20 years in retirement. Yet on average employees pay less than 3% of their salary into their pension pot. Unless contributions rise, less than half of median earns will have an adequate income in retirement, according to ILC.

As a result, the ILC wants to see a Pensions Commission set up, which would take a “holistic, non-partisan” view on pensions policy. It should be given the remit to define target outcomes for retirement savings and extending working lives, monitor progress against those targets and ultimate have the power to decide whether new policy reforms are needed.

Tim Fassam, head of public affairs at Prudential, which sponsored the report, explained that while recent changes have improved the number of people saving and offered wider retirement choices, the fact remains that people still aren’t saving enough for the retirement they want.

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Are you saving enough for retirement? What do you think should be done to encourage people to save more? Let us know your thoughts in the comments box below.

More on pensions and investment:

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How to avoid the 55% pension lifetime allowance savings trap

Free State Pension statement now available to over-55s