Calls to raise the State Pension age to 75 begin! Could this retirement tip protect you from poverty?

Latest research suggests the State Pension could be made even more difficult to claim. Protect yourself with this top investment tip, says Royston Wild.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s easy to see why so many Britons are scared about retirement. The meagre £168.60 State Pension paid to retirees each week already leaves millions of people living close to the breadline. And if a new suggestions comes to fruition, having been recommended by a prominent MP and former government minister, well, things could get harder still.

A report published by the Centre for Social Justice (CSJ) suggests that the age at which citizens can claim the State Pension should rise to 70 within a decade — by 2028 to be more specific — and to 75 by 2035. That would see an enormous ramping-up of existing government plans to battle Britain’s rapidly-ageing population (under current plans, the pension age will be hiked to 67 by 2028 and then to 68 by 2046).

It might be tempting to take the think tank’s report with a pinch of salt, though those doing so may be making a major mistake. It might never happen but the CSJ is headed by former Conservative Party leader and current MP Iain Duncan Smith, who up until 2016 was Secretary of State for Work and Pensions.

Fancy working longer?!

A hefty increase in the State Pension age wasn’t the CSJ’s only recommendation, however. The think tank also suggests that “removing barriers for older people to remain in work” should also be explored by the government, including improving access to flexible working and bolstering opportunities for training.

I don’t know about you, but I don’t fancy working when in my 70s and hanging on even longer for what is likely to remain a paltry state benefit. As I say, these are suggestions put forward by a think tank, rather than official Whitehall policy. However, they provide more evidence that shows how important it is to take steps to protect ourselves for our later years.

Protect your wealth

Taking charge of your retirement requires a lot more than just saving. Setting aside money at the end of each month is just half the battle and putting those funds to work is equally important. There’s no point scrimping and saving only to create a meagre return on your money, right?

Let me give you an example. The best-paying no-notice Cash ISA on the market from Yorkshire Building Society offers an interest rate of 1.4% (data from price comparison site Moneysupermarket.com shows). Were you to plough £250 into this account over the course of 25 years — assuming rates remained the same — this would make you around £89,600, a pretty mediocre return on a total investment of £75,000.

A better way to build a buffer big enough to protect you from State Pension uncertainty would be investing in equities instead. Let’s say that you invest that £250 in a tax-efficient Stocks and Shares ISA, one that generates an average annual return of 5%. Over that quarter of a century, you’d end up with around £146,400 in your wallet, a 66% improvement from what you could expect from that cash account.

Even in volatile times like these, I’m convinced that stock investing remains the best way to make a fortune from your savings. And there’s plenty of guidance out there to help you navigate the challenging macroeconomic landscape and possibly even make a fortune for your retirement.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Retirement Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

I’d try to grow a £100K SIPP by 9% annually doing this!

Our writer thinks a slow and steady approach could help him build the value of his SIPP dramatically. Here he…

Read more »

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

£8k in savings? Here’s how I’d aim to retire with a second income of £1,000 a month!

This Fool is considering a strategy to secure a second income from a small pool of savings. With the right…

Read more »

The words "what's your plan for retirement" written on chalkboard on pavement somewhere in London
Investing Articles

£30k in savings? Here’s how I’d aim to turn that into a second income of £15k

Here’s how I’d aim to invest in stocks and shares to generate a decent second income worth having in retirement…

Read more »

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

2 UK shares that could help set up a SIPP for decades!

Our writer explains the long-term appeal he sees in one British share he already owns in his SIPP -- and…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Here’s how I’m aiming to become a Stocks and Shares ISA millionaire!

I'm confident that a regular investment in FTSE 100 and FTSE 250 shares could supercharge the size of my Stocks…

Read more »

Investing Articles

3 top tactics that ISA millionaires use to strike it rich!

Ever wondered how ISA millionaires manage to make such enormous wealth? Here, Royston Wild divulges some of their greatest strategies.

Read more »

Investing Articles

Can a Stocks and Shares ISA help me retire early?

This Fool is confident that using his Stocks and Shares ISA will allow him to give up work early. Here…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Cash vs Stocks and Shares ISAs: here’s where I’m investing in 2024!

Cash and Stocks and Shares ISAs are both excellent products for the modern saver and investor. But which is the…

Read more »