Women previously could start receiving their state pension at age 60 and men at 65; but the government raised the threshold for women gradually to 65 as of 2018.
Currently, those aged 41 or below will not be able to get the stipend before they are 68.
This means that if people have not notified their pension provider if they plan to stop working before or after their default date, as their retirement income could be in danger.
This is because pension firms generally start ‘de-risking’ an individual’s investments the closer they get to their retirement age.
If these dates don’t match, the retiree could be losing out on several thousand pounds.
Women’s pension woes
The case is even worse for women who could lose almost £10,000 ($12,352, €11,224) if they keep their default age at 60.
This, however, is also the case for those who want to retire earlier, as their investments would not be de-risked and could be impacted by sudden market moves.
“De-risking profiles have been carefully designed to balance risk and return in the approach to retirement,” said Colin Williams, managing director of workplace savings & retirement at Aviva.
“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.”
Value your contributions
Things could be just as bad for those who choose to opt out of their pension, research by Royal London has found.
With almost one-in-four (23%) Brits aged 60+ deciding not to pay into their pension, they also risk losing a significant amount of money.
Royal London gave the example of a 60-year-old earning an average salary. By being enrolled into a pension scheme and paying the minimum 8% contribution, they would accumulate £14,000 by the time they reach age 65.
But if they were to stop paying into their pension – with contributions over five years averaging £6,600 – they could end up losing up to £7,000 from their employer’s contribution plus tax relief.
And with over 250,000 retirees in the UK finding themselves in this situation, they could, collectively, be missing out on as much as £1.75bn in retirement savings.
Save a little more
Helen Morrissey, pension specialist at Royal London, said: “It is understandable that someone at the age of 60 might think it is too late to save enough to make a difference to their retirement income, but they are wrong.
“Our figures show older workers are throwing away thousands of pounds on retirement income by opting out of their scheme.
“We would urge anyone thinking of opting out of their auto-enrolment scheme to think twice before doing so.”