Struggling Britons warned to not neglect their pension contributions | Personal Finance | Finance

Former Pensions Minister Baroness Ros Altmann said it was “deeply concerning” that people were either reducing or stopping their contributions to deal with the cost of living crisis.

Her warnings followed Scottish Widows’ findings that one in ten pension savers have stopped or reduced payments.

Meanwhile, investment manager Charles Stanley says a quarter of savers have quit or plan to quit this year or next.

Baroness Altmann is particularly concerned about the number of women who are dropping out of savings, as they are most dependent on private old-age provision in addition to the basic state pension.

She said she understands that those struggling financially may have no choice but to cut contributions, but said it’s important they restart when they can.

Baroness Altmann said: “It is deeply worrying. No one can live on a decent level on the state pension, we know it’s very difficult.

“So if you have little retirement savings, you’re really going to be a lot poorer later in life. But if it’s temporary, that’s one thing. The problem is, when you stop depositing, what makes you start again?”

Also Read :  Trump Claims 9 White House Records Are His Personal Property

She said: “There are of course concerns that the cost of living crisis is, for understandable reasons, luring people out of pensions but they never go back in. Then later we have armies of poorer retirees.”

Baroness Altmann, inset, added: “There is one particular issue that I think a lot of women are dropping out on and they are much more at risk because women tend to have lower pensions than men anyway. So it is an issue that needs careful consideration.”

Others may be tempted to pay off their mortgages in one lump sum when interest rates rise, but Baroness Altmann warned that it is “better to extend the mortgage terms, for example, than not to pay into pensions”.

She pointed out that retirement is “such a beneficial way to prepare for later life,” with tax benefits and employer contributions you don’t get with mortgages. The industry has also seen a surge in pension inquiries and people concerned about their retirement income.

Also Read :  Thermal Management Market Projected To Hit USD 20.3 Billion at a 8.20% CAGR by 2030

Karen Barrett, founder of the Unbiased website, which connects consumers with independent advisors, said: “We’ve definitely seen a big spike in inquiries about pensions lately and a spike in hits on our pension calculator, which calculates how much money people are making can expect from their pension fund when they retire.

“I understand people need to save for today, but I caution against suspending pension contributions as it reduces the long-term effects of compound interest and can jeopardize retirement plans.”

Matthew Connell of the Personal Finance Society, which represents professional advisers, said: “While reducing or stopping your contributions today will increase your net income, you’ll miss out on tax breaks and employer contributions to your savings pot when you retire.

“Even reducing your pension contribution by a small amount can result in a massive dent in your retirement savings. We encourage anyone considering reducing the amount saved today to seek advice or speak with a financial advisor to ensure they fully understand the future impact of their actions.”

Also Read :  Sekur Private Data Launches SekurMessenger for Enterprises

And Charles Stanley’s Lisa Caplan commented, “Understandably, people are looking for ways to support their living expenses, but are making choices that affect their long-term financial situation.”

Pension provider Scottish Widows found that average pension savings have fallen by around £37 a month. If a person currently in their 30s has been paying £47 less a month for over a year, they will have £1,000 less in their pension pot when they retire.

But if they hadn’t increased contributions after the crisis ended, they would be down almost £23,000.

Charles Stanley found that 9 percent had already stopped contributing to the company pension, 8 percent planned to do so within the next 12 months, and another 8 percent at some point later. Only a third had no plans to stop posting.

Leave a Reply

Your email address will not be published.