Pensions and living longer

A pension is simply a form of saving for retirement that has tax benefits. The money you save in a pension builds up into a pot which could be converted into a fixed or flexible taxed income or can be taken as a single or series of cash lump sums. You can usually take up to 25% of this tax-free with the remainder being taxed.

The number of people aged 100, or over, has quadrupled over the last two decades according to the Office for National Statistics.

The number of people aged 100, or over, has quadrupled over the last two decades.

While this is good news, the longer you live, the more money you need to fund your lifestyle throughout the whole of your retirement. This has had a big effect on pensions, both state and private.

State pensions

The income paid out to today's pensioners by the state, is funded by those who are working now. As the proportion of people over state pension age grows, the more expensive it gets.

To help counteract this, the Government is changing the age at which you can claim State Pension. It is currently 65 for men. State Pension age for women is gradually increasing from 60 and will reach 65 by November 2018. State Pension age for both men and women will then increase to 66 by October 2020. The State Pension Age will increase from age 66 to 67 for males and females between 6 April 2026 and 5 April 2028. These ages will be linked to life expectancy and other factors in the future and will therefore change.

You should consider this change as you plan your retirement. A State Pension Age calculator on the Government website will enable you to check your expected State Pension Age.

Individual pensions

Increasing life expectancy has also had a major effect on the amount of income paid out by individual pension schemes. Because the money saved up by individuals will have to last longer, you'll need to build up a larger pot of money to provide for your retirement, or work longer. It's therefore important to think ahead about how you can make the most of your potential income.

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