COVER STORY Retirement
2.2 %
- expected drop in real disposable incomes over the next year
cost-of-living crisis creates financial challenges not just today , but over the long term as well .” He says anyone thinking about stopping or reducing their contributions today needs to consider the longerterm implications . They will have to save more later to make up for it , or retire later or with a lower income .
The solutions The clearest message is not to opt out of pension arrangements at all , particularly if you are young . “ If you get to a point where you can ’ t afford to eat , or where you ’ re getting into debt , suspending pension contributions might be the right option ,” says McPhail . “ However , most people aren ’ t saving enough . They may be enrolled in their workplace scheme , but unless you started young and have an unbroken working life , if you ’ re on median earnings , that ’ s unlikely to be enough .
“ The state pension age is drifting up . Saving for retirement is getting harder , and money from your employer is free . Turning it down should be a last resort . One alternative is to ask your employer if they could maintain their contributions if you suspended yours .” McPhail recommends finding out how much you already have in your pension , then looking at the pensions calculator on the
Money Advice Service website . This will let you work out if you are putting enough away . It is also worth checking your pension is invested in the right way . Many employees will simply be entered in the default workplace scheme , and younger savers may be better off taking more risk . In general , equities offer greater protection against inflation than cash or bonds .
Inbuilt protection Romi Savova , chief executive of
PensionBee , notes that the act of pension saving already has inbuilt inflation protection because of the tax incentives . “ For every £ 100 a saver pays into their pension , the government adds another £ 25 in the form of tax relief ,” she says . “ Some
/ 12 / trustnet . com