Retirement can mean different things to different people. Some elderly people long for quiet evenings in front of the fire and gentle country walks, whereas others see retirement as an opportunity to travel the world and finally indulge in their hobbies.
Many retirees find that their twilight years are taken up by childminding duties for their grandchildren along with becoming an official lender for house deposits, new cars and weddings. Whatever you plan to do in your retirement, it is important to get your finances in order in plenty of time to ensure that you can afford a comfortable retirement without having to worry about money.
Retiring in the UK
The state pension age in the UK is currently 65 for men and 63 for women. The government have announced plans to begin increasing the pension age from December 2018 to 66 for both men and women by October 2020. The state pension age is expected to rise to 67 by 2028.
Owing to higher standards of living and better health care, elderly people are living active lives for much longer than previous years, and the government takes these factors into account when raising the state pension age. Elderly people are no longer required to stop working once they reach a certain age and can remain in employment for as long as they wish.
Default Retirement Age
On the 1st of October 2011, the government scrapped the Default Retirement Age (DRA). Previously, employers could force their employees to take their retirement once they reached 65 years of age. This led to many workers finding themselves out of a job even though they were willing and able to continue in their employment.
Elderly people are now free to retire from their jobs at any age they wish, and the abolition of the DRA has led to thousands of workers being able to keep their jobs for as long as they want. According to AgeUK, 100,000 elderly employees were forced to retire in 2009 before the introduction of the new laws.
One of the most important parts of planning a retirement is securing a comfortable monthly income in the form of a pension. UK residents that reached state pension age after 6 April 2016 are eligible for the new state pension providing they have paid enough national insurance contributions. Those that reach state pension age before April 2016 will qualify for their pension under the old rules.
As well as a state pension, elderly people may be eligible for additional money if they have been paying into a personal or stakeholder pension or their employer has been paying into a private workplace pension scheme. The money you receive from a state pension is usually a set amount, but private pension schemes pay different amounts depending on how much you have paid into them and how your investment has fared.
As private pension schemes can be unpredictable when it comes to the amount of monthly income that they pay out, an increasing number of retirees are choosing to invest in buy-to-let property in order to secure their future. Property is often considered to be more reliable than a private pension scheme and can also be passed down to children or grandchildren in the form of a will.
However, it is important to purchase the right property and secure a good mortgage deal to ensure that the rent covers the monthly repayments, care and maintenance of the house and provides an extra income. A professional estate agent can help locate a suitable buy-to-let property and you can get additional details from Taylors regarding the buying process.
Rather than buying property, some retires choose to sell their existing property and use the money to fund their retirement. Many people choose to downsize to a smaller home or even relocate to another country.
Although securing a retirement income may seem like a distant problem for those in their 30s and 40s, it is never too soon to start planning. Most employers offer some form of workplace pension scheme, or you can choose to take out a private pension to protect your future.
Whatever you decide to do, it is important to get some form of security in place while you are still young and have a wide range of options to choose from. A financial planner can talk you through all of the different pension schemes available and help you plan the best possible retirement without having the added pressure of financial insecurity.
Charlie Black is a personal finance consultant based in London who works exclusively with the over 50s. Find his articles online giving advice and tips on saving for, and enjoying retirement.
By Charlie Black