British workers are at risk of being slapped with a £150,000 state pension shortfall in retirement due to becoming sick, shocking new analysis has found.
Data from the Office for National Statistics (ONS) has found that health life expectancy in the UK for both men and women has dropped to around 62 years old in England; slipping to 60 in Wales.
Health life expectancy is a measure of the average number of years a person is projected to live in good health, without having to deal with limitations or disabilities.
With the state pension age sitting at 66, analysts are sounding the alarm that workers could find themselves too sick to keep working while falling short of being eligible to access payments.
New analysis is warning Britons of a potential £150k state pension shortfall
GETTY
To access the full, new state pension, Britons need to have 35 years of National Insurance contributions under their belt with any employment gap potentially risking how much people receive.
Based on exclusive analysis by Hargreaves Lansdown on behalf of MoneyWeek, a 40-year old could face a £150,000 state pension gap due to illness.
For a 50-year old dealing with sickness, this retirement savings gap could reach £93,000, which could force those affected to take action.
According to Hargreaves Lansdown's analysis, saving an extra £400 or £500 month into a private or workplace pension to bolster their retirement prospects.
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Sick Britons could see their retirement savings take a hit
GETTYHelen Morrissey, the head of retirement analysis at Hargreaves Lansdown, said: "The state pension plays a hugely valuable role in our retirement planning and there are few people who can do without it.
"This causes extra issues for people who are unable to keep working until state pension as not only are they drawing from their pension early to make up for lost income they also need to account for the hole where the state pension would have been."
In the firm's analysis of the state pension gap, Hargreaves Lansdown used examples of a 40-year old and 50-year old who are both making £35,000 a year, contributing the minimum amount via auto enrolment and have a retirement fund worth £60,00.
Based on the group's research, the 40-year old would have around £203,000 in savings by 62, whereas the 50-year old would have earned £140,000 in their pot.
Due to changes in policy, the 40-year old would have a state pension age of 68 which means they would be hit with a six year shortfall if they stop working at 62.
Taking into account the triple lock and if payment rates rose by three per cent, the state pension would be worth £23,000 once they reach 62.
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GETTYAs such, the 40-year old would need to find an extra £148,000 in retirement savings to make up for the state pension shortfall accumulated over the six-year period.
Morrisey recommends that this individual would need to contribute an estimate £420 per month to their workplace pension pot to address the difference.
She added: "The figures show the importance of topping up contributions wherever possible to make sure you can weather the income shock that poor health can bring.”
“Taking the opportunity to increase your pension contributions whenever you can – for instance when you get a pay rise or new job – can be a great way of boosting your pension relatively painlessly and help you make sure early ill health doesn’t derail your retirement plans."
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