Copy article

DWP: More non-retired respondents expect to retire at 66 than any other age

ended 07. October 2024

The Department for Work & Pensions has this afternoon published a report that seeks to understand awareness of the State Pension system and attitudes toward retirement among a cohort approaching State Pension age. Key findings below. 

  • Retirement expectations are changing. More non-retired respondents expected to retire at 66 than any other age. Most still expect to retire before State Pension age, the average expected age of retirement was 64.5 years.
  • Over three quarters (77 per cent) expected to become eligible for the State
    Pension within 12 months of their actual State Pension age. 42 per cent knew when they would reach State Pension age exactly.
  • There is broad awareness the State Pension age is changing. Less than one-in-five men expected to reach State Pension age at 65 and only 6 per cent of women expected to receive the State Pension before 65.
  • Most (60 per cent) were aware it is possible to defer the State Pension but there was less awareness of the specific details of the policy. Just under half correctly identified they could receive a higher weekly payment (increment) if they chose to defer their State Pension.
  • Almost four-fifths (78 per cent) correctly identified that the income from the State Pension was taken into account when working out whether they have to pay income tax. Half of the respondents knew that National Insurance did not apply to earnings past State Pension age.
  • 10 per cent intended to defer their State Pension. Expecting to still be working was the main reason for this decision.
  • Faced with a hypothetical choice between deferring for a higher weekly payment or a lump sum, there was a stronger preference for the lump sum regardless of the generosity of the increment.

Newspage sought the views of pension and financial services experts, below.

5 responses from the Newspage community

Copy all

Star Quote
Copy

Colin Low
Managing Director at Kingsfleet
Many individuals are now understanding that there is a difference between retirement and State Pension Age (SPA). Given the increased flexibility of Personal Pension arrangements, people are now weighing up the benefits of taking Personal Pension funds earlier in the knowledge that their State Pension will arrive at a future date. With more and more clients of Financial Planners going through a Cashflow Planning experience, there is greater clarity of when funds are required and how much. Few clients opt for a deferment of their State Pension, unless they are continuing work beyond SPA, judging that "a bird in the hand"..." The State Pension is a wonderful income to look forward to but indivduals must be aware of its interaction with their other income and any tax consequences.
Copy

Editor
Anita Wright
Independent Financial Adviser at Ribble Wealth Management
The data shows a growing awareness that the State Pension age is changing. However, there is some confusion, especially among women and those under 65. This could be because the UK has undergone significant reforms in recent years, including changes to the State Pension age, which are likely to have been communicated more clearly in recent times. The fact that more non-retired respondents expect to retire at 66, with many expecting to retire at around 64.5 on average, suggests that many people are planning for retirement slightly earlier than the State Pension age. This could be attributed to a combination of factors: people may be accumulating enough private savings or pensions to retire earlier, or at least believe that they can. Health concerns or lifestyle choices may lead some to plan for retirement before the State Pension age.
Copy

Editor
Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
British workers are playing retirement roulette, gambling with their financial future by relying on incomplete knowledge and overly optimistic assumptions about their pension prospects. This latest report exposes a gap between expectations and reality for those approaching their golden years. The report reveals that most non-retired respondents expect to hang up their work boots at the age of 66, however, optimism still reigns supreme, with the average expected retirement age hovering at a sprightly 64.5 years. Furthermore, while 77% of respondents believed they would become eligible for the State Pension within a year of their actual State Pension age, only 42% could pinpoint their exact eligibility date. This discrepancy highlights the need for improved communication and education about pension entitlements. The gap between perception and reality is a ticking time bomb that threatens to derail the financial security of future generations.
Copy

Chloe Phillips
Chartered Financial Planner at Pura Vida Financial Planning
It's striking that the data in this report was collected in 2018, two years after the SPa changes came into force in 2016. This timing may have influenced participants' knowledge. So much has happened since then, it raises the question of how much of it still reflects today's reality.

The report frames β€˜early exit from the labour market’ as an issue, but this seems somewhat misplaced. Most people in the study expected to retire before reaching State Pension age, with an average expected retirement age of 64.5 years.

Rather than seeing this as a problem, it reflects the fact that many individuals value the option to retire earlier if they can afford to. Retirement is about choice, not about working until a set age. The fact that only 16% of respondents expected to work again highlights the broader desire for rest and quality of life in retirement, which should be acknowledged, not seen as a negative trend.
Copy

Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
The State Pension is not affordable for the UK to continue paying to everyone. The longer the Government leave it to address this, the bigger the fallout is going to be.

The State Pension needs to become a means tested benefit.

However, to ensure fairness for those who have been expecting and planning for this pension their entire working lives, a phased approach to this needs to be taken.

Those yet to enter the workforce should be now told that they will not get a State Pension. This gives them 40 years to plan properly for their retirement. And if State Pension Age they have not made pension provisions then the means tested element can kick in.