A myriad of pension challenges
One consequence of the cost of living crisis is a rising number of people cutting back on or stopping their pension contributions.
A new report from insurer Scottish Widows found that one in 10 has reduced or ceased pension contributions.
Scottish Widows surveyed 5,025 people and found an average pension contribution reduction of £37 a month.
If applied to adults across the UK, it would mean a reduction of £2.5 billion in pension contributions each year.
While Scottish Widows noted that 11% of people who stopped saving into a pension was “a relatively low proportion of people”, they also stated that “it is concerning that some have been forced to do so”.
Their calculations show a saver in their 30s, reducing pension contributions by £47 a month, could have £1,000 less in their pension pot when they retire if they maintain these lower contribution levels for a year.
The report said:
“That may not seem like much, but more worrying is if the lower contribution becomes entrenched because they don’t get around to raising their contributions after the crisis has passed.”
Also in the research, 17% of respondents said their pensions are invested in cash or cash-like assets, including UK government bonds (gilts).
With rising inflation, a pension pot held in cash could suffer real-terms losses of around 12% over the next two years.
The research also found that more than a third of self-employed people are not saving anything for retirement.
Pete Glancy, head of policy at Scottish Widows, said:
“We are facing a myriad of issues and there are no easy solutions.
“It’s sadly understandable that households are being forced to make some tough choices in their budgets, but it’s important they do so whilst taking a longer-term look at their finances.”
If you are not yet retired, the questions you need to ask yourself are:
- Are you saving enough for your retirement
- Do you know what your financial future could look like?
- Do you know when you can afford to retire?
- Do you know how much is enough?
If you are looking for answers to these big questions, now is the time to speak to a financial planner about your own financial future and your own retirement plans and planning.
For more information please don’t hesitate to contact the Wells Gibson team.