Working five years beyond state pension age could boost retirement income by a third, according to a study by The Pensions Policy Institute and Friends Life.
For those in the lowest quartile of private pension savings, this increase will take weekly pension income from £156.90 per week to £208.80 once they have given up work.
This would lift them above the average £200.88 weekly living costs during retirement, making up a shortfall that would otherwise make their retirement a much greater financial struggle.
The difference bought by continuing in work for an extra five years can be seen across the range of pension incomes - those with the biggest pensions would see their weekly income increase by a quarter, to £1,358 per week.
The report also examined the effects of working part time, both before and after, reaching state pension age.
Choosing to work part time after state pension age will increase income, but the change is negligible for those with median retirement income, at only £1.80 per week if they worked part time for one year after retirement.
However, this also means that switching from full time to part time work in the year before retirement will not result in a significant reduction in retirement income. The average person would see their weekly income drop by just 60 pence if they make this change.
Chris Curry, director at the PPI, explained that by using data from the English Longitudinal Study of Ageing, they were able to take actual individuals and model how their pension incomes might change right the way through retirement if they behave in different ways.
“This has revealed that working up to and beyond state pension age, for those who can and want to do this, offers a real alternative to saving more or having a lower than ideal income in retirement.”
Andy Curran, UK chief executive at Friends Life, argued that to really make the most of retirement income, both government and the pension industry have a responsibility to help people review their options and the implications of continuing in work.
Paul Yates, Selectapension’s development director, said that consumers are increasingly looking to their advisers for help in preparing retirement plans with either new or adjusted later life income strategies.
“Advisers need to help their clients understand all of their options at retirement and take appropriate steps to secure their future. We expect demand for advice or guidance to be high from clients and advisers will need efficient systems to respond to these demands.”
peter.walker@ft.com
