PensionBee, a leading online pension provider, has identified a ‘Pre-State Pension gap’, which would require an extra £130,000 in retirement income if someone retires at age 60 rather than 68, the incoming State Pension age, and £85,000 if they want to retire at age 63 (see table 1 below).
Meanwhile, as the Government considers how to reverse the ‘Great Retirement’, as well as raising the State Pension entitlement age to 68 sooner than previously planned, 4 in 10 British adults (40%), equivalent to around 13 million people, think they will not be able to retire before the State Pension entitlement age, rising to almost half (48%) if the State Pension age rises to 68 (see appendix tables 2 to 4). Almost one-in-five (18%) said they didn’t know if they would be able to retire before the State Pension age or not.
This is despite widespread agreement among respondents that the ‘ideal’ retirement age is 60, with a third (33%) of respondents choosing this age as the answer to the question: “At what age would you ideally like to retire?”
In addition, the majority of British workers considerably overestimated the typical healthy life expectancy for workers in the UK, with only 1 in 10 correctly answering that it is between 61 and 65 (approximately 63 according to ONS data*). More than a quarter (26%) vastly overestimated the healthy life expectancy age, which is defined as ‘the number of years a person can live in full health, without disease and/or injury’, stating it was between 76 and 80.
The findings come ahead of a Government-led review by Baroness Neville-Rolfe that is widely expected to conclude that the State Pension entitlement age should rise from 67 to 68 sooner than planned. Currently the State Pension age is set to reach 67 by 2028 and the minimum age at which people can access their private pensions will also rise from 55 to 57 in 2028. The increase from 67 to 68 is already slated to take place between 2044 and 2046, however there are suggestions this could be brought forward to the mid-2030s, potentially affecting people currently in their early fifties, who would have otherwise been looking forward to retirement at 67.
Further analysis by PensionBee suggests that the extra savings needed to retire early may be out of reach for an ‘average’ worker. Someone with a typical pot of £40,000 saved up by age 50 (and who could potentially face a rise in State Pension age to 68) would be looking at a shortfall of around £153,400 on what they would need for the whole of their retirement, including after they start receiving the State Pension, in private savings to retire at 60 (about £232,000), versus what they might realistically have saved up by this time (an estimated £78,600).
The typical shortfall to make up for someone with an average pot size at age 50 and wanting to retire at 63 would be £89,400: they would need about £181,000 in private savings to lead a moderate lifestyle for their whole retirement, but would be likely to have amassed about half this, at £91,400. However they could still potentially afford to retire at 67, even if the entitlement age goes up to 68.
Becky O’Connor, Director of Public Affairs at PensionBee, commented: “The Government may want to end the Great Retirement, but the truth is that retiring before State Pension age is pie in the sky for many.
The ‘Pre-State Pension gap’ is the total amount of retirement income someone would need to retire earlier than the State Pension entitlement age and maintain a moderate lifestyle. Our analysis suggests that is way out of reach for a worker on an average salary and with a typical pot size at age 50.
The ‘ideal’ retirement age, according to our survey was 60, while the healthy life expectancy age is on average 63 in the UK, so we used these two ages in our analysis to give an idea of the value of this particular pension gap for people who might want or need to retire at these ages, rather than waiting until they get the State Pension.
Meanwhile, 4 in 10 workers think they wouldn’t be able to retire before State Pension entitlement age, suggesting that bringing forward the increase to age 68 would not merely be a costly inconvenience for more people, it would effectively force more workers to carry on working until the point they can draw their State Pension.
The research also reveals that many people overestimate the age to which they will remain healthy, perhaps indicating that retirement is not commonly-viewed as a way to protect people in ill-health from the demands of work.”
PensionBee has a pension calculator to help people work out how much they are likely to have for retirement.
Appendix
Table 1: Sizing the pre-State Pension savings gap
| Worker age 50 on £35,000* | Total income from private pension | ‘Pre-State Pension gap’ | What you would have in your pension | Amount of private pension needed |
|---|---|---|---|---|
| State Pension age of 68: | ||||
| Retire at age 60 | £232,000 | £136,000 | £78,600 | £153,400 |
| Retire at age 63 | £181,000 | £85,000 | £91,600 | £89,400 |
| Retire at 68 | £96,000 | £0 | £114,800 | -£18,800 |
| State Pension age of 67: | ||||
| Retire at age 60 | £221,400 | £119,000 | £78,600 | £142,800 |
| Retire at age 63 | £170,400 | £68,000 | £91,600 | £91,600 |
| Retire at 67 | £102,400 | £0 | £110,000 | -£7,600 |
Full table titles: Worker age 50 on salary of £35,000, Total amount of income from private pension pot needed to retire (with moderate lifestyle as defined by PLSA), The ‘pre-State Pension gap’ (moderate income x number of years without state pension), What you would have in your pension pot at retirement age given average pot size and growth assumptions and The amount of private pension needed for whole retirement v amount in typical pot
Source: PensionBee, February 2023. Columns 3 and 4 assume £40,000 in pension at age 50. Assumes in a couple and targeting a moderate income in retirement of £34,000 (£17,000 each), which after age 68, assumes a state pension of £10,600. All figures in today’s money and rounded. Growth assumptions 2.5% above inflation growth, 0.7% fee, no salary increases between age 50 and 68.*
Table 2: Will you have enough in your private pension pot(s) to retire before you start receiving the State Pension?
| Question | % of respondents |
|---|---|
| No, I probably will not | 24 |
| Yes, I probably will | 20 |
| I don’t know if I have enough or not | 18 |
| No, I definitely will not | 16 |
| Yes, I definitely will | 9 |
| I don’t have a private pension pot(s) | 9 |
| I don’t know if I have a workplace and/or personal pot(s) | 4 |
Source: PensionBee, February 2023. Numbers have been rounded.
Table 3: If the State Pension age goes up to 68, will you still be able to retire earlier than this?
| Question | % of respondents |
|---|---|
| No, I probably will not | 28 |
| Yes, I probably will | 20 |
| No, I definitely will not | 20 |
| I’m not sure if this will affect my retirement plans | 18 |
| Yes, I definitely will | 9 |
| I’m not sure if I have a State Pension | 6 |
Source: PensionBee, February 2023. Numbers have been rounded.
Table 4: At what age would you ideally like to retire?
| Age | % of respondents |
|---|---|
| 60 | 33 |
| 65 | 19 |
| Other | 17 |
| 55 | 10 |
| 50 | 8 |
| 70 | 5 |
| 62 | 2 |
| 40 | 2 |
| Don’t know / unsure | 2 |
| 75 | 1 |
| 45 | 1 |
Source: PensionBee, February 2023. Numbers have been rounded.
Table 5: A healthy life expectancy is defined as the number of years a person can live in full health, without disease and/or injury. What do you think is the average ‘healthy’ life expectancy age in the UK?
| Age | % of respondents |
|---|---|
| 76-80 | 26 |
| 71-75 | 19 |
| 80+ | 17 |
| 66-70 | 13 |
| 61-65 | 11 |
| 56-60 | 9 |
| 50-55 | 6 |
Source: PensionBee, February 2023. Numbers have been rounded.
