Want more state pension? Then stay healthy

Retired couple staying fit by cycling together in the woods

We're all living longer, that fact can't be denied, but how well you are going to live in retirement is open to debate.

Health life expectancy isn't keeping pace with overall life expectancy and men and women who retire at age 65 can expect to live 56% and 57% of their retirements in good health and 58% and 55%, respectively, free form disability, according to the Office of National Statistics.
The key point in those figures are 'retire at 65' and the reason that number is key is because you probably won't retire that early.

If you're relying on the state pension to support you in your dotage there's a good chance that your retirement age will be at least 69 if you're aged 47 or younger now.

There is lots of talk about whether these increases in state pension age are fair and on the whole it can be argued – and the government has argued – that it will be as you'll spend two-thirds of your life working and a third of it in retirement.

Overall it does seem to be a fair deal but there are discrepancies that creep in when you break down the country into certain demographics. Life expectancy varies greatly depending on where you live in the country – with those in the South of the country likely to live longer than those in the North – and type of employment plays a big part too.

Unsurprisingly, those who work in blue collar, manual jobs live shorter lives than those in white collar, professional jobs.

Manual workers earn less and will likely have less saved into a workplace or private pension than a professional worker so it means they will be more reliant on the state pension in order to retire but they will be getting it later and dying sooner so getting less out of it.

I'm all for state pension age increases – our economy can't afford to keep it age 65 – but it raises the question of whether we should be using the 'average' person's life expectancy to determine how long we will live in retirement. Should we in fact base longevity on the life span of a person with the most chance of dying?

This would mean that people who are manual workers, or living in a part of the country with lower life expectancy, would get as much out of the state pension as 'the average person'.

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Want more state pension? Then stay healthy

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.

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