The age that people can claim their state pension has risen, but many adults are not prepared to change their preferred retirement age. This gap between planned retirement and the state pension becoming available could cause issues with financial planning for later life, according to new research.
Researchers based at the University of Bath and Utrecht University looked at individual’s retirement behaviour in response to changes in the age state pensions become available. They found no evidence that men or women were adjusting their expected retirement age in response to the increase in the state pension eligibility age. The findings suggest that while changes in the state pension eligibility age are important for people’s actual retirement, they don’t persuade people to revise the age they expect to retire.
A gap between retirement and being able to claim the state pension can be a problem for people who will rely on the state pension as their main source of income. Evidence suggests that engaging with retirement planning is more likely for people who have higher levels of financial literacy. People who understand more about financial planning for retirement are less likely to experience a sharp fall in living standards later in life and have better health outcomes.
The researchers say, “From a policy perspective our findings suggest policymakers in the UK may need to improve communication to raise awareness of state pension eligibility ages for cohorts approaching retirement years and among younger prime age workers. Recent developments such as the midlife MOT and forthcoming Pensions Dashboard Programme aim to address some these issues, however a key concern here is engaging individuals to use such tools and improving financial education in the context of retirement planning in the UK, especially among younger cohorts.“
EmploymentMoney and finances
