COVER STORY
The uncomfortable truth
Pension saving is tough at the best of times . While workplace auto-enrolment has increased the number of people saving for retirement , the average pension pot remains at just over £ 60,000 , enough to generate an income of about £ 200 a month . High inflation could make this tough situation a whole lot worse . Rising prices set investors ’ saving plans back in two ways : first , they mean retirees need a bigger pension pot to support their lifestyle ; and second , they make pension contributions difficult to afford as household budgets are squeezed . Pension saving may be the first casualty in the face of rising heating and food bills . The Bank of England ’ s inflation predictions make for uncomfortable reading . CPI has already hit 8 % and could rise further over the next few months , fuelled by rising energy and import costs , and it isn ’ t expected to move back towards the target rate of 2 % for two to three years . The era of benign inflation that retirees have enjoyed since the 1990s is drawing to a close . This means people have less money to spend . In his latest Budget , the chancellor predicted a 2.2 % fall in disposable income , the biggest drop since ONS records began in the 1950s . A national insurance hike , plus rising energy bills and high food costs , leaves retirement saving looking like a luxury that many people can ’ t afford .
The good news In general , pension opt-out rates from workplace schemes have been low – around 10 % in the 12 months to the end of March last year . Data from Nest shows that automatic enrolment has significantly increased the number of people saving for retirement since it was introduced in 2012 . By opting workers into saving , the proportion of employees in their workplace schemes rose from 46.5 % in 2012 to 77.6 % in 2020 . The worry is that inflation will cause more people to opt out of workplace schemes , and these may be the ones who need them most . Tom McPhail , director of public affairs at the lang cat ,
/ 8 / trustnet . com