State Pension age could be reviewed due to pandemic says expert
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State Pension age for most people is currently set at 66, but is due to undergo further increases in the future. This is usually the point at which many feel comfortable with leaving the workforce, secure in the knowledge they have regular income in retirement. However, more and more people are being forced to abandon plans of retiring at state pension age, and are instead working longer.
The decision appears to be one which is driven by questions of affordability and insecurity in later life.
Some 39 percent of UK homeowners between 40 and 50 said they are worried about their job prospects leading up to and into retirement.
This appears to be compounded by the fact that nearly one million over 45 year olds were recorded as being on furlough – support which is set to end in September.
Close to a third of homeowners over 40 also said they believe they cannot afford to retire when they want to.
An additional 30 percent are unsure of whether they can retire.
What is clear is that even if people are choosing to remain in work, understanding existing pension savings will be key.
With only 10 percent of those asked planning to delay accessing all of their pension savings while they continue to work into retirement, caution must be exercised.
Andrew Tully, technical director at Canada Life, told Express.co.uk: “We have seen a seismic shift away from traditional retirements, driven by economic and social trends and it simply isn’t the cliff edge event anymore.
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“The desire to continue working beyond state pension age is coupled with the fact that many people are nervous about their employment prospects in later life.
“However, for many, this is coupled with a desire to access their pension early.
“While this may help achieve some financial security in the short-term it means there are substantial doubts about the sustainability of the pension being able to support them through later life.”
Mr Tully warned Britons to be aware of what is known as the Money Purchase Annual Allowance (MPAA).
If a person begins to take money from their pension pot, the amount they can pay into a pension and still receive tax relief on may reduce.
The tax charge is one many people will be keen to avoid, but could trigger without even realising it.
Mr Tully continued: “The Money Purchase Annual Allowance will unwittingly catch out ‘pension dippers’ who want to continue working, given the prevalence of workplace pension schemes.
“The MPAA is an arbitrary allowance which is easy to increase or remove altogether, and would allow savers to rebuild their pensions, especially in light of the pandemic and resulting uncertainty created.”
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As a result, with a number of people planning to access pension saving while still working, understanding restrictions will be key.
This fact was highlighted by recent research undertaken by Canada Life which showed the extent of the problem.
It revealed more than 43 percent of over 55s who are working are completely unaware of restrictions.
An additional 40 percent stated they did not know much about the details when it comes to pension contributions.
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