Work Longer To Supercharge A Pension

Retirement savers can supercharge a £100,000 pension fund by up to £11,000 by opting to work an extra two years, according to a pension expert.

Delaying retirement could help thousands of over 55s who are worried that they do not have enough cash saved for their retirement.

Former government pension adviser Dr Ros Altmann says a study reveals around 20% of over 55s doubt they have enough cash to pay their basic day-to-day living costs once they stop working.

So, carrying on working for just a couple of years will boost their savings and take away their financial stress, she says.

“Pension planning is out of date because the rules have changed so much in recent years,” she said.

More years in retirement

“People now spend more time in retirement because we are living longer and the time we have in work to save does not provide enough money for those later years.”

Altmann reckons research shows 70% of over 55s would opt to work longer if they knew the money they earned would give them more money once they retired.

“I calculate that working full-time for an extra year or part-time for two years would give these people an extra 11% boost to their retirement savings,” she said. “This would give people more time and money to pay down their debts and at the same time allows savings to grow as well.”

In her report, written for pensions firm MetLife, Altmann predicts that retirement will change in the future. Instead of a sudden stop, from working one day and retiring the next, retirement will become more of a gradual wind down over a period of time.

New lifestyle needs new methods

She explains that in the 1950s, people tended to work for 50 years up to age 65 and then spend five to 10 years in retirement.

Now, the average time in work has dropped to 45 years, but the number of years in retirement has increased to 23 years.

Now the government has linked the official retirement age to longevity, new workers entering the workforce in their 20s can expect to work until they are at least 70 years old.

“Old methods applied to a new lifestyle will inevitably not work,” said Altmann. “Financial services providers need to realise this and update their advice and products to reflect the changes.”