It’s easy to see why so many Britons are scared about retirement. The meagre £168.60 State Pension paid to retirees each week already leaves millions of people living close to the breadline. And if a new suggestions comes to fruition, having been recommended by a prominent MP and former government minister, well, things could get harder still.
A report published by the Centre for Social Justice (CSJ) suggests that the age at which citizens can claim the State Pension should rise to 70 within a decade — by 2028 to be more specific — and to 75 by 2035. That would see an enormous ramping-up of existing government plans to battle Britain’s rapidly-ageing population (under current plans, the pension age will be hiked to 67 by 2028 and then to 68 by 2046).
It might be tempting to take the think tank’s report with a pinch of salt, though those doing so may be making a major mistake. It might never happen but the CSJ is headed by former Conservative Party leader and current MP Iain Duncan Smith, who up until 2016 was Secretary of State for Work and Pensions.
Fancy working longer?!
A hefty increase in the State Pension age wasn’t the CSJ’s only recommendation, however. The think tank also suggests that “removing barriers for older people to remain in work” should also be explored by the government, including improving access to flexible working and bolstering opportunities for training.
I don’t know about you, but I don’t fancy working when in my 70s and hanging on even longer for what is likely to remain a paltry state benefit. As I say, these are suggestions put forward by a think tank, rather than official Whitehall policy. However, they provide more evidence that shows how important it is to take steps to protect ourselves for our later years.
Protect your wealth
Taking charge of your retirement requires a lot more than just saving. Setting aside money at the end of each month is just half the battle and putting those funds to work is equally important. There’s no point scrimping and saving only to create a meagre return on your money, right?
Let me give you an example. The best-paying no-notice Cash ISA on the market from Yorkshire Building Society offers an interest rate of 1.4% (data from price comparison site Moneysupermarket.com shows). Were you to plough £250 into this account over the course of 25 years — assuming rates remained the same — this would make you around £89,600, a pretty mediocre return on a total investment of £75,000.
A better way to build a buffer big enough to protect you from State Pension uncertainty would be investing in equities instead. Let’s say that you invest that £250 in a tax-efficient Stocks and Shares ISA, one that generates an average annual return of 5%. Over that quarter of a century, you’d end up with around £146,400 in your wallet, a 66% improvement from what you could expect from that cash account.
Even in volatile times like these, I’m convinced that stock investing remains the best way to make a fortune from your savings. And there’s plenty of guidance out there to help you navigate the challenging macroeconomic landscape and possibly even make a fortune for your retirement.
