Work until 75 for a comfortable retirement
Millions of people will have to work until they are over 75 because they aren't saving enough for a comfortable retirement.
Research carried out by the Pensions Policy Institute (PPI) shows that people are not saving enough to cover the fact they will live longer than previous generations.
"In the past three decades, life expectancy has increased dramatically in the UK. On the whole, this is good news for individuals, but it also means that many people will need to save more and work longer if they want to have an adequate retirement income," says Niki Cleal, PPI director.
The research found that 45% of people in their 50s would have to work an extra 11 years past the state pension age, currently 65, if they wanted to have a comfortable income in retirement.
Comfortable in retirement
"On a positive note, around 40% of today's over 50s who are still working might have sufficient state and private pension income to have a retirement income that would allow them to replicate their full living standards in working life, if they continue to work and save until they are eligible to receive their state pension," adds Cleal.
The PPI has calculated that a comfortable retirement income would be 50 to 80% of gross income when people were working.
"These figures show that the traditional pattern of retiring and living comfortably on a pension earned over many years of working has broken down," says Michelle Mitchell, charity director general of Age UK. "Lower annuity returns and other factors mean that more and more people will have to work past their state pension age - and often for many years - if they are to have enough money to live comfortably."
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.