Inaction over retirement age changes could leave savers £10,000 worse off

Pension savers in the UK could miss out on nearly £10,000 if they do not update their planned retirement date, Aviva has revealed.

Due to recent changes to the state pension age and the removal of the default retirement age, anyone planning to retire later than a default retirement age of 65 could miss out on benefits if they work beyond their default.

Aviva’s analysis shows that an average earner in an automatic enrolment scheme could miss out on more than £4,000 in their pension pot by sticking with a default retirement age of 65 when they actually intend to retire at 68.

Anyone whose retirement age is still set at 60 could miss out on almost £10,000. This is a situation that is more likely to affect women, due to the way default retirement ages were previously set.

The firm has warned that someone planning to retire later than their set default that has not notified their provider may be in line for “serious consequences” in retirement.

If the saver’s provider holds a retirement age that is too young, they will move investments into less risky assets too early, while those with a retirement age that is too told are at risk of keeping their money in riskier investments for too long.

Around 47 per cent of workers are saving into DC pensions, with around 90 per cent of those invested in default funds, meaning that this issue could affect a significant number of savers.

Commenting on the analysis, Aviva managing director of workplace savings and retirement, Colin Williams, said: “De-risking profiles have been carefully designed to balance risk and return in the approach to retirement.

“But this balance is thrown out of kilter if someone wants to retire at a different age than was originally assumed when they started their pension.

“Changing your retirement age is a really simple way to maximise the potential returns of your pension investments. Plus, it’s an opportunity to check how much is in your fund and if you’re on course to achieve the type of retirement you want.

“Many providers allow you to check and change your retirement age online. I’d encourage people to go online and check the retirement age their provider holds, and if doesn’t match their current plans, change it.”

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