Jul 25

How to retire early, whatever the state pension age is

I’ve been talking a lot  on TV recently about the State Pension age going up.

Six million people will have to wait a year longer than expected to get a State Pension, after the government brought forward a rise in the pension age. Those currently aged between 39 and 47 will now have to work until they are 68 before they qualify for the benefit. The increase in age was brought forward from 2044 to between 2037 and 2039.

Frankly, I think the age will go up again and will have to be brought forward again, simply because we’re living longer, demanding more (not just in terms of pensions but also elder care) and the country’s economy isn’t growing fast enough to keep up.

There may be some flexibility in the official retirement age later down the line but, at the moment, just to keep the massive pension bill down for the country, it seems to me that the Government has to do this.

But it doesn’t mean that you have to wait until you’re 70, 69 or 68 to retire. You just need to know how to retire early.

You can take things into your own hands and retire much earlier if you’re clever.

Here are the facts:


Why is the state pension age going up?

Businessman looking annoyed/upset at his laptop

The State can’t afford it and will definitely not be able to afford it in coming years.

Essentially we’re victims of our own success. We are living a lot longer than the actuaries, and former Governments, expected us to do. This means that every year more of us are receiving a State Pension – while those who are working and paying tax and National Insurance to support it are not increasing at such a rate.

The State Pension is the biggest part of the country’s welfare bill. Here’s what the Office of Budget Responsibility says:

“In our latest forecast, we expect state pensions spending in 2016-17 to total £91.6 billion, with 12.9 million recipients paid an average of £7,100 each. That would represent around 12 per cent of total public spending, and is equivalent to £3,300 per household and 4.7 per cent of national income .”

Projections by the Office of National Statistics suggest the pension bill will rise to £170bn by 2032/33 and to £438bn by 2062/63 if nothing is done to alter the number of people receiving the pension each year. When other benefits paid to some pensioners, such as housing benefit and disability living allowance, are factored in, the cost rises to £491bn (9.4% of GDP) in 2062/63.

This latest move by the Government is expected to save the country £74bn in welfare payments. If this money isn’t saved it will have to be made up in some other way, either by borrowing yet more or by taxing the future young workers and removing more of their benefits.

what will it cost us?

If you’re 50+ it’s not going to affect you – although there’s nothing to say that things couldn’t change again for you.

However if you’re in your late 30s and early 40s this will affect you. Anyone born between 1970-1978 will have to wait an extra year to get their State Pension. According to the House of Commons library each person affected by the change will miss out on around £9,800 by retiring one year later.


What are the options for the State Pension in the future?

Woman looking at cash thoughtfully

The Cridland Review of the State Pension and official retirement age made a number of suggestions to help improve things over the next few decades. You can see what John Cridland and his team wrote here. One of the recommendations was that the pension age had to rise. This is what the Government has now announced.

This is probably not the last time that the retirement age is put back. A report from the Government’s Actuaries department also indicated that people under 30 should expect to have to work until 70 before receiving a State Pension. This is something that has been suggested for a couple of decades at least.

However, Cridland also suggested more flexibility in retirement ages for people in certain jobs and in different regions, as well as recommending a mid-life MOT to help people plan for their retirement. See what the TUC thinks of that here.

our ageing population is a ticking time-bomb

In July, Cridland said that Britain’s ageing population is as serious as climate change. He stated that “‘There is very strong growth in people hitting 80, then 90, then 100 and we need to find ways in telling that story because we have to bring that consequence home to people…I would argue it is not just a pensions issue, it is a health issue and the ageing society for the next generation is as big an issue for this country and the world as climate change.”

options for cutting the State pension bill

As the number of pensioners increases, something has to give. The options for covering it are (as I see it):

  • Increase the age at which people officially retire, thus keeping more people out of the State Pension for an extra year or two (this is what the Government has done).
  • Reduce the amount that pensioners are paid by the State. So far the Government has done the opposite, increasing the pension payments with the ‘triple lock’ which is supposed to be in place for three years but might be there for longer.
  • Increase National Insurance payments – even double them – making working people pay more for the retired ones.
  • Take more benefits away from working age people. This is something that has already been done to some extent. The Resolution Foundation brought out research recently suggesting that pensioner households on average are better off than working households after housing costs have been taken into account. They say that over the last 15 years pensioner incomes are up nearly 30% while working age families have incomes only a little above what they were in the mid-2000s.


how to retire early

Group of happy seniors on holiday with handfuls of money

Now the thing is, the official State retirement age doesn’t have to affect you substantially if you take matters into your own hands.

Many people retire at 50. Some at 40. Some footballers and successful performers retire in their 30s. So, how to retire early? What’s the secret?

It all depends how much money you have saved and invested early on.

You can see in this video here that I answered a – really sensible – question from a reader about how much he had to save to retire at 55. Yes, it is possible:

If you start on your own retirement fund – as we all need to and will increasingly have to going forward – then you can retire as soon as you have enough in that pot to live off comfortably without working full-time.

So, for example, if you want to have an income of around the national average wage (about £27,000 a year at the moment), you should have a pot of money of at least £550,000.

Sounds like a lot (and it is!) but it’s not impossible at all. Many people have amassed far more than that simply by cutting down on daily costs and putting small, regular amounts into stocks and shares ISAs. See this article on how you can make good money for yourself with stocks and shares ISAs.

Easy, cheap index-tracking funds are great ways to invest in the stock market without effort. You can wrap them in an ISA and just leave your money in there for a few decades to grow quietly.

Remember you don’t need mega-money to invest.

There are people all over the place who are quietly making savings on their day-to-day spending and syphoning that extra cash into investments for the future. See what this guy – Mr Money Moustache – has done to retire early.

You can do it for your kids too. In fact, even putting small amounts into stocks and shares Junior ISAs now can help them to be millionaires by the time they come to retire (multi-millionaires if they add money in themselves). See here how to make your child a millionaire.

a bit on the side

One of the reasons we write so much about how to make money on the side is we know that these small, extra bits of cash, if invested in pensions or stock market investments, can grow to a really decent pot of cash for your retirement.

Seriously, even an extra £25 a month can make a big difference later on.

So take a look at some of the money-making ideas we have in our ‘make money’ section here. Pick a couple that you could do and earmark that money for your future, and your future alone.

save at any age

Even if you’re in your 50s or 60s and you don’t feel you have enough for a comfortable retirement, there is still time.


what do you think about the state pension age changes?

I have already had responses to my comments on TV and radio, saying that this move is inevitable and that there are likely to be more changes coming to reduce the State Pension bill.


Chris Tinsley from Merseyside said this: “The fact you support this decision, this shows how you are totally out of touch. With the reality of working peoples lives, paying tax and NIC is not a choice they are an insurance policy for retirement, raising the eligability age should  also not be a a financual option, by people who have miss managed the fund,  people like me who have paid into this scheme from our weekly wage in the belief this will support us as we get older should not have to work longer to access what we are rightly due to.”

There are a few misconceptions here.

Firstly, the idea that National Insurance is just for the State Pension. It isn’t, as the economist Francis Coppola explains in this detailed article on whether the State Pension is a right or a benefit. She says: “National Insurance contributions are used to fund a range of benefits. Broadly speaking, the purpose of National Insurance is to “insure” people against the risk of them being unable to work, the aim being to provide them with an income until either they are able to work or they die. The risks insured against include unemployment, sickness, maternity and bereavement, as well as old age. National Insurance also partially funds the National Health Service. In short, National Insurance is not a pension scheme and should not be regarded as in any way similar to a private or occupational pension scheme.”

She also shows in the blog how the State Pension is a benefit and not something we are ‘rightly due to’ for a specific and set length of time.

Also, the idea that the Government has ‘mismanaged’ this non-existent pension scheme is false. Essentially the National Insurance contributions paid by current working people are used to pay the pensions of retired people. The ‘mismanagement’ if you could call it that, was by actuaries some years ago who didn’t realise that we would be living as long as we are and that, therefore, the number of people being paid a State Pension would massively increase each year from the 90s onwards. The number of working people compared to retired people is drastically reducing and in a few years’ time, if we keep things as they are now, it will be an impossible burden for the workers to fund the retirees.


Then John Winton emailed this: I think you are the first person on TV that has said that in the not too distant future there will be no Government Pensions as such. And yes, That must happen. The kids of today feel it is a right they must have when in fact it is they that must prepare for their own future. The majority of them don’t because they do not know how. it should be taught, and it should be taught at school.”

I didn’t say that there will be no State Pension scheme, but I said that it was possible and that, whatever happens, the safest approach for all of us to take is to assume that there won’t be one and to create our own retirement fund.

If there is a State Pension once we all come to retire then that’s a nice extra, but it’s too risky just to assume that it will be there and that it will give us a decent standard of living on its own.

He’s quite right that we urgently need financial education and it’s the adults who need it particularly urgently so that they can invest for themselves and protect their futures. This is why we have easy-to-follow articles in our investing section here.


On BBC Radio Kent, one caller said she thought it was very unfair that nurses, for example, should be forced to work longer as their jobs were very physical. Of course there are a few jobs like this, like building and lorry-driving, that take a lot of physical effort. There are also parts of the country where life expectancy is lower than the average (Glasgow, for example) and you could argue that it’s not fair for people there to have to retire later.

The Cridland report pointed this out and suggested that some flexibility should be introduced into the State Pension to help those who have to stop work earlier for reasons outside of their control.

It’s possible that this will happen but it depends on Government decisions which I’m not privy to. It would be difficult, and probably expensive, to administer so don’t hold your breath. While the Government deals with the fall-out from Brexit, very little in the way of complicated legislation is going to be worked on, I think!

Tell us what you think about these changes, what should happen in the future, who should get more money and who should get less and what you think the Government should do to keep the old and the young going in the future. Put your comments below.


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225 thoughts on How to retire early, whatever the state pension age is

  1. I’ve been working and paying tax since I was 13.Am now 47 and have to work another 20 years to get a state pension. This is very depressing.
    The younger generation aren’t getting jobs as people can’t afford to retire and therefore not passing the job on.Nhs will have its hands full as older workers maybe more prone to accidents and illness in the years they should be sitting back and taking it easy.

  2. This is SCARY! when I get to state pension age, the way this is going, I’ll be in by sodding 90’s! This is disgusting…. so much money being thrown away and wasted in so many areas in this country, WHEN will we get someone who can actually manage the finance’s of this country! There are many things that can save money and not cause people to suffer, this is going to cause unnecessary suffering and I for one am NOT looking forward to having to work for another 45+years!!!!


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