Working five years longer boosts pension pots by a third

Jessica Morris
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Would you defer retirement for five years? (Source: Getty)

The secret to a more comfortable retirement is to stay in work that little bit longer, new research has shown.

Staying in full-time employment for five years after the retirement age, while continuing to pay into a private pension, could lift final weekly incomes by a third according to the Pensions Policy Institute and Friends Life.

By staying in employment for another three years individuals could boost their retirement income by 20 per cent. Working for just one extra year past the retirement age could also swell pension pots by six per cent.

Chris Curry, director of institute that produced the report, said: "By using data from the English longitudinal Study of Ageing we have been able to take actual individuals and model how their pension incomes might change right the way through retirement if they behave in different ways."

"This revealed working up to and beyond state pension age, for those who can and want to do this, offers a real alternative to saving more or having a lower than ideal retirement income."

The findings are particularly interesting in light of research which has sounded alarms over retirement incomes, with a number of think tanks even calling for reforms to and overhauls of the current system.

The International Longevity Centre has called for the establishment of an independent Pension Commission, saying rising household debt, plummeting saving rates and longer life spans threaten retirement incomes.

A separate report released by the Centre for Policy Studies called for the creation of an annuities auction house, which would be used by savers who are unsure about what to do with their pensions.

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