When dealing with personal injury claims, many solicitors ask how much difference the expected retirement age makes. The short answer is: a significant difference. In personal injury cases, retirement age is a key assumption underpinning the calculation of future loss of earnings, pension loss, loss of dependency and lost years claims.
Because many professionals now work well beyond State Pension Age, whether due to financial necessity or personal choice, it is vital to consider how long each individual claimant might have continued working if not for the injury. Everyone is different and deserves a bespoke financial approach to their personal injury claim.
In this article, Chartered Financial Planner Ian MacKendrick breaks down why hypothetical retirement age matters, how State Pension Age factors into claims and the evidence that independent financial experts consider when preparing reports.
Why Expected Retirement Age Matters
Extending a claimant’s anticipated working life can have a substantial impact on the valuation of a personal injury claim and loss of earnings. In many careers, salary is highest in the final years before retirement. Losing those years can therefore have a disproportionate effect on the overall value of the claim.
For example, a later retirement date than normal may increase:
- Pension loss
- Employer pension contributions
- Loss of dependency
- Claims involving lost years
- Additional tax relief calculations
There is no universal retirement age that applies to every claimant. While retiring at 67 may be entirely realistic for one individual, working until 75 may be more likely for another. It is always important to ensure that the evidence supports retirement age assumptions in personal injury cases.
Personal Injury Claims for Loss of Pension
Projecting a longer working life also increases pension losses. For members of defined contribution pension schemes, additional years of contributions and investment growth can produce a much larger pension fund, resulting in:
- Greater retirement income
- A larger tax-free lump sum
- Increased financial security throughout retirement
For members of defined benefit pension schemes, working beyond normal retirement age can also increase pension benefits, depending on the scheme rules and any late retirement enhancements that apply. When calculating how much a claimant would have received when they retired, each pension scheme needs to be assessed individually.
Increase in State Pension Losses
Financial analysis should also include State Pension entitlement, which is a taxable government payment based on your National Insurance (NI) record.
When unable to work due to injury or long-term illness, many claimants cannot earn NI contributions, and not all state benefits provide NI credits. If those contribution gaps are not identified, the claimant could ultimately receive a reduced State Pension. In some cases, the financial impact can be worth thousands of pounds over the course of retirement.
Also consider that State Pension Age has increased significantly over the last two decades and continues to change. Current legislation provides for further increases over time, and future governments may make additional changes as life expectancy, demographics and public finances evolve.
For this reason, relying solely on today’s State Pension Age is rarely sufficient when projecting a claimant’s likely working life decades into the future. The appropriate retirement age assumption for a personal injury claim should always be based on their individual circumstances rather than a standard retirement age.
How Are Personal Injury Claims Calculated?
When preparing reports and helping to calculate personal injury claim valuations, independent expert witnesses consider factors such as:
- The claimant’s age
- Occupation and career path
- Health before the accident
- Earnings history
- Previous retirement intentions
- Employer practices
- Pension arrangements
- Any evidence suggesting they intended to continue working beyond State Pension Age
In many cases, we model multiple retirement scenarios so the Court can clearly understand how different assumptions affect the overall value of the claim.
How Paladin Experts Can Help
At Paladin Experts, we prepare independent expert witness reports covering:
- Future loss of earnings
- Personal injury claim for loss of pension
- Loss of dependency
- Lost years personal injury claims
- Periodical Payment Orders (PPOs)
- Court of Protection financial matters
If you are unsure whether a later retirement age is supportable in one of your cases, we are always happy to discuss the evidence and provide an initial view before formal instruction. To discuss a case or obtain an initial view on retirement age assumptions in personal injury cases, please get in touch with our expert team.
