Victor Trokoudes, founder and CEO of smart money app Plum, has issued a warning to people about the importance of clearing their debts in order to ensure financial stability during retirement. With the average retirement age currently at 64, individuals are already retiring before their state pension kicks in at 66.
"The state pension age is set to increase gradually to 67 between 2026 and 2028, and then increase further to 68 between 2044 and 2046. It's crucial for those approaching retirement to clear their debts so they can maintain financial security," said Trokoudes.
Mortgage repayments for variable rate mortgages have continually increased over the past year as the base interest rate has gone up. Trokoudes emphasizes that paying off mortgage debts can provide extra cash when needed during retirement years.
Research from Plum found that only one in five individuals aged between 18-44 are saving an additional amount towards a comfortable retirement. Pensioners have also warned of potential 'stealth taxes' due to rising pension ages and smaller state pension payments.
A new report from the Institute for Fiscal Studies (IFS) highlights Britain's approach toward a pensions crisis with Generation X being hardest hit. The IFS discovered that more than three million workers failed to save any money into a pension this year alone.
The report calls for a major review of the British pension system which guarantees lifetime income but underperforms in investment returns compared with initial expectations. It also warns against increasing numbers of retirees who no longer own homes, projecting private renters aged over 65 will double within ten years.
Experts suggest there is still time for Generation X members to secure their retirements by obtaining state pension forecasts and tracking down private pensions owed them.
Furthermore, IFS findings reveal that pre-pandemic, pensioners were less likely to experience relative income poverty (18%) compared to families with children (31%). Although the government has aimed to protect pensioner finances, the tax relief system tends to favor wealthier individuals.
The Intergenerational Foundation thinktank recommends that the government require developers to include housing for older people in their plans. This could contribute toward addressing both individual financial stability and broader concerns about Britain's looming pensions crisis.