The State Pension age is rising. Here’s what I’d do to protect myself

In less than a decade, the State Pension age will hit 67. Want to retire before that? Read this now.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The State Pension – the regular income paid by the UK government to those in retirement – is a source of frustration for many Britons. Not only is the payout very low at just £168.60 per week (which isn’t enough to live a comfortable lifestyle) but the age at which you can claim it is also rising. In less than a decade’s time, it will hit 67 for both men and women, up from 65 just last year.

However, if you plan ahead, you can protect yourself from both the low payout and the rising age. Act early, and you could build up your own retirement pot that enables you to retire earlier than State Pension age (who wants to work until their late 60s?) and also live a comfortable, relaxing retirement. With that in mind, here are two smart financial moves that could set you free from State Pension worries.

Saving into a SIPP

Saving up a sum of money for retirement is the best way to boost your chances of living a comfortable retirement. But where’s the best place to save your money? One option to consider is saving into Self-Invested Personal Pension (SIPP) account. This is a government-approved personal pension scheme designed specifically for those saving for retirement.

SIPPs offer savers numerous advantages. For starters, they enable you to hold a wide range of investments (more on this below) which means you have the opportunity to grow your money at a high rate over time. Moreover, all your gains and income are tax-free, which means more money for you and less for the taxman.

In addition, when you contribute into a SIPP, the government will top-up your contributions in what is known as ‘tax relief’. For example, if you’re a basic-rate taxpayer and you contribute £400 into your SIPP, the government will add another £100 for you, taking your total contribution to £500. Higher-rate taxpayers can claim even higher levels of tax relief.

SIPPs do have their drawbacks so it’s important to be fully aware of how they work. However, overall, for those looking to boost their retirement wealth, they’re a very effective savings vehicle.

Investing in shares

Once you’ve saved up some money for retirement, you want to get this working hard for you. If you leave it in a cash account earning 1%, you’re not going to get ahead.

If you have a number of years before you plan to retire, it could be worth investing some of your SIPP savings in stock market-based investments such as shares and funds. The reason I say this is that these kinds of investments tend to deliver strong investment returns over time, meaning they can really help you boost your wealth. According to this year’s Barclays Equity Gilt Study, British stocks have delivered a return of around 5% above inflation per year since 1899 – far higher than the returns from cash savings.

Of course, stocks can be volatile in the short term, so you don’t want to be over exposed to the asset class. However, given that long-term stock market investing is a proven way of generating wealth, it could be sensible to have some exposure to stocks.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young black man looking at phone while on the London Overground
Value Shares

After a 16% drop, FTSE 100 stock JD Sports Fashion looks like a steal to me

This FTSE 100 stock has tanked since mid-September. Edward Sheldon believes that there's value on offer after the share price…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Is now the time to buy BP shares? Here’s what the charts say

The best time to buy shares in a company is when they’re trading at a discount. But the future is…

Read more »

Investing Articles

Here’s how I’d use £50K to aim for a million when the stock market crashes

Seeing a stock market crash as a buying opportunity could prove lucrative for a well-prepared, long-term investor. Christopher Ruane explains…

Read more »

Stack of one pound coins falling over
Investing Articles

It’s up 27% with a P/E of 9! I’m considering the potential of this blossoming penny stock

Despite several years of losses, this UK penny stock has an impressive valuation. I’m looking to see if it could…

Read more »

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »