If you want to retire early, read this

For years, men qualified for their state pension at age 65 and women at 60, and everyone knew where they stood. Then, that was ruled gender discrimination, and it was synchronised at 65 for both sexes. Then, politicians declared that unaffordable due to rising life expectancy, and started lifting the state pension age for everyone. 

On 6 October 2020, the transition to age 66 for all was complete. It will rise to 67 by 2028 and 68 by 2037, then continue to climb after that. The result is that millions will have to work longer and retire later than originally planned. Although you can retire at a younger age if you wish, you won't get a penny from the state pension. So, what can you do about it? 

In one respect, the answer is simple. Save a huge pot of money under your own steam. That way you will be free to retire whenever you choose.  

The state gives you plenty of support to save for retirement. The auto-enrolment workplace scheme has given millions of mostly lower paid workers a company pension for the first time.Staff are automatically enrolled, hence its name, and contribute 4% of their qualifying earnings, with the government adding 1% tax relief. Employers must pay in a minimum 3%, which means 8% of your salary between £6,240 and £50,000 goes into your pension, based on 2020/21 tax year. 

Please, do not opt out. If you do, you are turning down free money and wrecking your chances of building a decent pension. 

You should invest under your own steam, too. You can pay into a personal pension, and claim tax relief on your contributions, at either 20%, 40% or 45%, depending on your tax bracket. 

To contribute £100, a basic rate taxpayer needs only pay in £80, and a higher rate taxpayer just £60. Every adult can also invest up to £20,000 a year in a tax-free ISA, either as cash or in stocks and shares. 

Although there is no tax relief on your contributions, your money will grow free of income tax and capital gains tax, for life. Those aged between 18 and 39 should also check out the Lifetime ISA, which gives you a 25% government bonus on contributions up to £4,000 a year, worth a maximum £1,000. 

You will never save enough for a pension by leaving money in a savings account, especially with today's near-zero interest rates. People save for retirement over a working lifetime, which could be more than 40 years, and over such a lengthy period stocks and shares should deliver a higher return, albeit with volatility along the way. 

Say you start investing at age 26 and put away £200 a month. If your money grew at an average 6% a year after charges, you would have a pretty impressive £393,714 by age 66. 

Your early contributions are the most valuable, as they have longest to benefit from compound growth. 

If you waited until 36 to start investing your £200 a month, you would accumulate just £201,124 by 66. Aim to increase your contributions year after year. If that 26-year-old lifted their payments by 3% annually, they would have £595,608 after 40 years. 

Salaries are being squeezed, and few people can afford to save large sums like that. 

Especially young people, who have other calls on their cash, such as running a car, saving for a property deposit, or simply enjoying life. Retirement may seem a long way off, but it will approach sooner than you think. Do your best to strike a balance. 

The rising state pension age is tough on manual workers or those with health problems, who will struggle to work into their late 60s. There is a campaign to grant people in this position early access to their state pension, at a reduced rate. 

For now, the only way to retire in comfort at a time of your choosing is to invest, invest, invest. Nobody said it was easy. 

Read more: Can you retire without a pension?

Read more: What percentage of my earnings should I save?

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