Average Brits want to retire five years before they can – who has the widest retirement gap?

The time gap between when Brits want to retire and when they actually think they will be able to has widened in the last year, according to a new report, as rising living costs, pension insecurity and ongoing financial pressures push retirement further out.

Brits’ preferred pension age remains at 62, the research by Standard Life found, unchanged from last year. In 2023, it was 61. However, on average, people don’t expect to be able to retire until 67. This is an increase from 66 last year, widening the average predicted gap to five years.

The picture – which takes account of the retirement attitudes of 6,000 people – is mixed, however, with different regions and lifestyle factors having a big impact on post-work expectations.

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Women, renters and people in the North East face the longest delays between when they want to retire and when they believe they will be able to. The average gap increases to more than six years for renters and for those with no pension savings, for example.

We look at how much you need to retire comfortably and how to boost pension savings in separate articles.

Catherine Foot, director of the Standard Life Centre for the Future of Retirement, said: “The fact that people face a growing gap between their retirement hopes and expectations reflects the financial pressures and uncertainties many households face.

“There are some clear variations depending on where you live, your level of income, the amount of pension savings you have, and whether or not you own your own home.”

Why are we working longer?

An analysis of economic activity among the over-50s by the Department for Work and Pensions by retirement company Just showed the average age of exiting the labour market has risen to age 65.8 for men and age 64.7 years for women.

These rates compare to record lows of around age 63 for men and age 61 for women around the year 2000.

Higher consumer prices – inflation is currently running at 3.8%, almost double the Bank of England’s target – and uncertainty around the wider economy are having a dampening effect on people’s outlook for the future, according to Standard Life, pushing them to work longer.

Only three in ten (30%) of UK adults said they are currently living comfortably, and despite half (53%) worrying they aren’t saving enough for retirement, only 15% have pension saving as one of their top financial priorities for the year. Almost half (47%) feel their retirement finances are outside their control.

State pension fears

The scheduled rise in the state pension age from 66 to 67 between 2026 and 2028 is a possible factor in the shift in expectation to not retiring until age 67. Yet the Standard Life report also showed public awareness of the state pension age is low – with less than one in five (18%), out of 6,000 respondents, correctly identifying the current state pension age of 66.

Trust is also low that the state pension – the bedrock of the current generation’s retirement planning – will still work the same way it does today when the next generations come to retire.

Less than a third (29%) think the triple lock will still be in place when they reach retirement, and only a little over half (51%) think the state pension will be available for all by the time they retire, as it is currently.

What age will you retire?

The average retirement expectation gap across the UK is five years – 4.1 for men and 5.4 for women – but it varies widely depending on where you live, how much you earn, and whether you own or rent your home.

Regionally, the gap is widest in the North East (5.9 years) and Yorkshire & the Humber (5.3 years), and it is the narrowest in London (3.5 years) – creating a regional difference of 2.4 years.

The East of England and the South East both have a retirement expectation gap of 5.3 years, and Scotland and Wales both face a 4.9 year gap. The West Midlands, at 4.7 years, has the second-narrowest gap.

One of the biggest factors affecting how much of a delay you face in retiring is whether you own your own home. Those who are renting face a gap of 6.1 years, compared to 5.2 years for homeowners paying off a mortgage, and just 2.4 years for outright owners.

Income also plays a big role. For households with an annual income under £30,000, the retirement expectation gap is 6.2 years; it narrows to 5.1 years for those earning £30,000 to £50,000, 4.6 years for those earning £50,000 to £100,000, and just two years for the highest earners.

Another deciding issue in when you can expect to retire is the type of pension you have – if any. Those with no pension savings face a 6.5 year retirement expectation gap, compared with 4.7 years for those with defined contribution pensions, 2.5 years for those with defined benefit pensions, and 2.1 years for those with personal pensions.

How to retire earlier

Getting to grips with retirement planning – and finding even small ways to boost your pension – can help you fight back against a number of these challenges and set you on the path to retiring earlier.

People who do something about their retirement planning tend to have a smaller retirement expectation gap, Standard Life found, even at lower income levels.

For example, despite being the lowest-income households, those who earn under £30,000 and say they have done ‘a great deal’ of retirement planning, have a gap of just 4.7 years compared to those who have done no planning, where it is more than eight years (8.1).

Amongst the highest-income households, financial planning closes the gap from 4.2 years to less than a year (0.9) for those who have planned for their retirement.

For those able to do so, even a modest bump in monthly pension contributions can also go a long way towards helping people retire when they want to.

For example, someone who began work on a salary of £25,000 per year and paid the minimum auto-enrolment contributions (5% employee, 3% employer) from the age of 22 could build a total retirement fund of £201,000 by the age of 67.

But they could potentially retire on a slightly larger pot of £204,000 at the average preferred retirement age of 62 if they increased their monthly contributions by just 2% from the age of 22.

They would, however, need to pay for more years of retirement with that pot, including bridging the gap to their state pension age.

Foot said: “Those facing a gap between their retirement hopes and expectations can take meaningful steps to narrow it with the right support, however advice and guidance plays a crucial role here too – from encouraging people to plan earlier and save more consistently if they can, to helping people find ways to manage financially in the years before the state pension begins.”