Local independent financial adviser, Becky Hammonds of Willow Financial Solutions, looks at how the cost of living crisis is hitting pension contributions and the implications of cutting payments:
There’s no end in sight to the cost of living crisis – inflation has now soared past 9% – the highest it has been in 40 years. This has also “driven the fastest fall in real pay on record”.
As a result, many households are cutting back on what they perceive to be non-essential items.
The Pensions Management Institute (PMI) has reported that millions of savers are opting out of their pensions.
According to the PMI, 20 per cent of staff have opted out of their workplace’s pension schemes or asked for their contributions to be reduced during the course of the last year.
A further 20 per cent are considering taking similar steps to create some extra cash to use now.
By axing their pensions contributions each month, those on lower salaries of £20,000 a year can boost their take-home by approximately £550 a year.
However, cutting pension payments means that employees will miss out on their employer’s tax relief, resulting in less being saved for their later years.
And, as the cost of living crisis has already increased the cost of later life care, those retirees wanting a comfortable retirement and enough money to pay for this care, will need to build a pot of around £470,000 in retirement wealth, according to a new report by BUPA.
Although many people may not have a choice when it comes to their cost of living priorities, it is important to consider the implications of any actions.
An independent financial adviser is ideally placed to provide information and advice on the best route to take and the results of any pension contribution cuts.
For more information contact Becky Hammonds on 07969 269677 or email email@example.com visit: www.willowfs.co.uk