State pension: Retirement age ‘likely’ to increase says expert
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Retirement will be looked forward to by many people who have often spent decades in the workforce. While enjoying later life will leave many in anticipation, it is deciding when to actually retire which may be tricky. This is compounded by the fact the decision is a financial one, as Britons lose the support of a regular salary or wages.
Bearing this in mind, Express.co.uk spoke exclusively to Ben Hampton, Retirement Advice Specialist at abrdn, who provided further insight.
This is likely to help Britons who are currently contemplating whether retirement is right for them at this point in time.
Mr Hampton said: “Future expenses are hard to predict, but to get a ballpark figure we work with our clients to review their current regular outgoings – i.e. household expenses, travel and leisure costs, mortgage and rent payments – and subtract any expenses they expect to no longer have.
“Consider any new ones or planned big purchases, like travel plans or a dream car, and think long-term to future costs that might come up, like care costs or moving home.
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“If you’re doing it yourself, there are a number of online calculators that can give an estimate of how much your annual cost of living adds up to.
“Or, you could create your own breakdown in a spreadsheet.”
The second step to take into account is calculating what a person has in their income.
This could be anywhere from pensions to investments, and of course, money held in savings accounts.
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Abrdn tends to help Britons by starting with what is likely to be their “main” pension pot, and ask how much a person has accumulated with any workplace pension.
Individuals are also encouraged to check if they could have any old pensions, which many may have lost contact with throughout their lifetime.
Most people will also be entitled to a state pension, which while is increasingly becoming viewed as a safety net, is relied upon by many.
However, Mr Hampton warned that with the state pension age rising to 67 between 2026 and 2028, this will have to be taken into account.
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Once these points are considered, then individuals can also check if they have any other forms of income later down the line.
This could, for example, be in the form of an expected inheritance, or pension plans, ISAs or investments.
Step three is for a person to calculate their estimated annual income which can then stretch over their entire retirement.
Mr Hampton continued: “Once we’ve added up the various sources of income and savings, it’s time to give an estimate of the income they may expect.
“There are online calculators that can do this, but most will focus on your main pension pot alone – and don’t consider things like the state pension, or other savings and part time work which can make such a difference to what is possible.”
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But individuals should not be disheartened if the initial number seen on these calculators is not what someone was hoping to achieve.
There are a number of options which may be available to Britons at this point which could help them with their retirement endeavours.
For example, working with a financial planner could help people, given these individuals often have expertise in a myriad of areas.
They can help future pensioners work out a tailored plan which is personal to them and helps them align this with their goals.
Mr Hampton concluded: “A lot of clients we work with decide they aren’t ready to completely retire and decide to continue to work, usually part time, and sometimes in a completely different role.
“If you’re looking for a quick and easy way to find out what your retirement income could look like, our online Retirement Advice report tool could calculate this for you in five minutes – taking everything we have mentioned above into consideration.”