A financial expert has issued a stark warning to young adults as it is speculated that Rachel Reeves will hike up the state pension age to 70. Antonia Medlicott, the CEO of website Investing Insiders, is urging Brits to save for retirement as early as possible as she believes the state pension age could rise to 74 for future generations.
The Chancellor may need to adjust the age limit at which tax payers receive their retirement benefit in order to meet her self-imposed financial rules, the expert says. “It wouldn’t be out of the scope of possibility for people in their 20s and 30s today to see the state pension age rise as far as 74 by the time they retire,” Ms Medlicott predicts. “Of course, there are a lot of factors to consider when making an estimate of this nature.
“However, the young should almost certainly seek to fund their retirement through alternative measures rather than rely on the state, which currently pays a meagre pension at best.”
The financial writer explained that increasing life expectancies and rules like the triple lock – which guarantees that pensions rise by whichever is the highest of 2.5%, inflation, or average earnings – were pushing up the pension bill.
The state pension currently stands at £230.25 per week – equating to £11,973 annually – but the overall pension bill could become “incredibly” expensive for governments to fund.
For those born after April 5, 1960, the state pension age will rise to 67, and those born after April 1977 will see it rise to 68.
This could rise further, Ms Medlicott says, as the Labour government looks for ways to balance the books, which includes increasing the age people can claim their pension.
The expert is now emphasising the importance of saving for retirement as early as possible.
She said: “The earlier you start, the more time you give your money to work.
“Combine small, regular contributions with an engaged approach – checking performance, keeping costs low, and making the most of employer contributions – and you’ll be far better placed for a comfortable retirement.
“Even small amounts add up. Contributing £10 a month to a private pension with 7% average growth, could grow to £30,894 in 40 years.
“Double that to £20 and you’re looking at £61,789 – and that’s without increasing contributions.”
Ms Medlicott continues: “Also never opt out of your workplace pension. It’s the gold standard. You get your contributions, tax relief, and at least 3% from your employer.
“You are unlikely to notice the difference in your take-home pay now, but you will in retirement.”