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ONS sees rising trend of retirement funding gap
People approaching state pension age are struggling to fund their later years - creating a situation where people are working longer, the Office for National Statistics has found.
Three chapters released from the annual Office of National Statistics’ Pension Trends study revealed the average age when people retire has risen from 63.8 years to 64.6 years for men and from 61.2 years to 62.3 years for women between 2004 and 2010.
The 34-page analysis said this trend is expected to continue as the SPA moves up in line with longer life expectancy.
The data also suggested that women will see their life expectancy at retirement age drop over this decade, from 28 years to 24, because of the rise in SPA.
The figures also indicated that 56 per cent of men and 57 per cent of women who are retired at age 65 could expect to spend their retirement in good health.
In 2010, there was a ratio of 3.2:1 of people of working age supporting each person of state pension age and over in the UK.
Without any changes to SPA, this ‘old age support ratio’ would drop to 2.0 by 2051, the study said, adding that, under current legislation, the SPA has already begun to increase for women and SPA for both sexes will rise to 68 by 2046. When these SPA changes are taken into account, the old age support ratio is projected show a slower decline to 2.9 by 2051. The data also added there are inequalities in life expectancy between social classes. The latest estimates for England and Wales show a gap of more than three years in life expectancy at age 65 between the highest and lowest classes in the National Statistics Socio-economic Classification. Within the UK, life expectancy at age 65 is highest in England and lowest in Scotland.
Ros Altmann, director general for Saga said: “As pensions increasingly move from defined benefits to defined contribution and as investment returns and annuity rates fall, people are reaching their 60s and realising their pensions have not produced the income levels expected. Many people are still fit and want to keep working because they prefer to stay active. These trends are bound to accelerate.”
Ian Cooper, IFA for Cheshire-based Cheshire House Financial Planning, said people approaching retirement can get help to fund their later life.
He said: “Higher income levels can be achieved using diverse portfolios but clients must be comfortable with the additional risk this may bring. Before retirement, clients should be made aware of the potential income these plans will provide. Any adjustments can therefore be planned while there is still time.”
