Retirees may have to work an “extra two years” says MGM

Picture: TSPL

Picture: TSPL

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Those approaching retirement may have to work for an extra two years to make up the shortfall between earnings and inflation - or accept a lower standard of living once they give up work - experts have warned.

A study from retirement specialist MGM Advantage found that someone earning £27,200 at the end of 2014 could have expected their earnings to be £33,699 if their wages had kept pace with inflation - which would leave a gap of £6,499 and a 13 per cent hole in the size of the pension pot at retirement of the average UK worker.

It warned that people who are unable or choose not to continue work to make up the shortfall would have to live on a lower income than they would have expected.

Andrew Tully, pensions technical director, MGM Advantage, said: “The impact of falling real pay has hit workers hard. It is reducing their standard of living now, and will potentially reduce their standard of living in retirement too. This sleeping giant will only rear its ugly head when people come up to retirement, and means many may have to work for longer than planned, or re-evaluate expectations of their retirement.

“This is not only an issue for people approaching retirement, but also something younger generations need to think about. For people who do have time on their side, the implications of lower pension contributions are relatively easy to address through making larger contributions now to make up the ‘shortfall’.”

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