Who gets to choose when you retire?

The government’s recognised retirement age is moving further away from public perceptions of the ideal point to stop work.

Recent research by Aviva revealed that age 60 is the most popular target age for early retirement. Coincidentally, that research was published a couple of weeks after the government launched a second review of State Pension Age (SPA). The current SPA for men and women is 66, rising to 67 between 2026 and 2028.

Changes to life expectancy

The initial independent SPA review in 2017 proposed an SPA of 68 should be introduced between 2037 and 2039. While the government accepted the recommendation, it decided not to legislate until after the second SPA review, due in 2023.

It is unclear whether the new review will prompt any change:

  • Assumptions about life expectancy improvements have been revised considerably since 2017. Broadly speaking, the Office for National Statistics (ONS) has now shortened the 2017 lifespan prediction for a 68-year-old in 2039 by about two and a half years.
  • Not raising the retirement age, however, ramps up government expenditure because pensions for the relevant age group will begin a year earlier.

Whatever the final decision, the SPA will remain at least 66. If you don’t want to wait for your state pension before retiring, then planning for your early retirement is essential. Aviva’s report also discovered:

  • Nearly half of early retirees said their finances took a hit as a result.
  • Close to a quarter of those who returned to work after retiring early said that financial issues were the reason they did so.

The sooner you begin, the better. If you retire early you will need to make up about £9,600 of annual income until your SPA arrives.

The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.  

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