As the UK state pension age continues to increase, a new study has found that many savers are looking to retire at least three years before they reach the official threshold – living instead for several years on private pensions.
Currently the state pension age is 65 for women and 66 for men, but the state pension age is rising at the same rate for both men and women and is set to reach 66 for both sexes by October 2020 ahead of further increases to 67 and then 68 in the following decade.
Despite the rise in state pension age, the new study from Canada Life has suggested a complex picture emerging of the average UK worker planning to access their private pensions before retiring from work and reaching state pension age.
It found that adults under the age of 55 believe early retirement might be too ambitious in terms of achieving their financial goals, but many still hope to retire at the age of 63, having received their private pensions at 62.
For many this may mean that they have a gap of three to four years where they are entirely reliant on their own savings.
Meanwhile, those who have already reached their 55th birthday plan to wait until they are 63 to access their savings, and not retire from work until age 67.
Andrew Tully, Technical Director at Canada Life, said: “Working till you drop clearly doesn’t appeal to the average UK worker who has plans to slow down in their early 60s, typically retiring from work three years before their expected state pension age.
“This ambition is helped by an expectation that they will begin to access their private pensions before they retire, at age 62. This creates a clear financial planning issue and people need to take positive steps early to mind the pension’s gap.”
Last year the Pensions and Lifetime Savings Association (PLSA) launched new Retirement Living Standards, designed to help people picture the lifestyle they want when they retire.
It found that 51 per cent of people focus on their current needs and wants at the expense of providing for the future and only 23 per cent of people are confident they know how much they need to save.