23 August: Young Adults Fear Missing Out On State Pension
About one-in-three young adults in their 20s (30%) believe the UK state pension will no longer exist by the time they retire, according to the insurer Royal London.
Research by the company also found that around half (50%) of young adults expect the state pension will be less generous in future compared with its current level of around £9,600 a year.
Royal London says more than half of young adults (56%) expect to have to wait until they are over 70 years of age before they will be able to claim the UK’s main retirement benefit. For anyone born after 6 April 1978, the current state pension age is 68.
The amount of state pension an individual receives is dictated by his or her National Insurance (NI) record. But three quarters of those questioned by Royal London (74%) were unaware that to receive the full state pension requires 35 years of NI contributions or credits.
A recent study by pension provider Standard Life revealed that, with inflation at a 40-year high and in the face of soaring energy bills, about 6% of workers in the UK are planning to reduce their pension contributions to make ends meet.
Clare Moffat, pensions expert at Royal London, said: “For workers in their 20s, retirement is likely to be one of the last things on their mind with more pressing financial priorities like the cost-of-living crisis and paying bills, saving for a house or even a car, occupying their thoughts.
“But concerns about when and how much state pension will be available might lead to an expectation that they’ll need to self-fund a greater portion of their retirement. Future financial security is likely to mean working for longer than previous generations and also saving more.”
23 August: September Inflation Rate To Determine State Pension
The state pension could be worth more than £10,000 for the first time in its history next year, thanks to a government commitment to restore the so-called ‘triple lock’.
The arrangement will raise next April’s state pension payments by either this September’s inflation figure – as measured by the Consumer Price Index (CPI) – average earnings growth between May and July this year, or 2.5%, whichever is the greater of the three.
The CPI inflation figure currently stands at 10.1% and, if anything, is predicted to get higher through the remainder of this year. If that remains the case, around 10 million pensioners will receive a state pension increase in excess of 10% next year, taking the state pension past £10,000 to its highest-ever level.
15 August: Employees Chop Pension Contributions
Nearly one-in-10 workers are planning to cut the amount they pay into their company pension to combat the cost-of-living crisis.
According to research from consultants Barnett Waddingham, 7% of employees – equivalent to 1.05 million people – said they are looking to reduce the amount they contribute to their workplace pension.
A workplace pension is a way of saving for retirement that’s set up by an employer. All employers are obliged to offer one, with employees contributing a minimum of 5% of earnings and employers contributing at least 3%.
Employees are automatically enrolled onto their workplace scheme, although it is possible to opt out.
The company added that the figure rose to nearly one-in-five (18%) workers in the age-range 18 to 34. According to Barnett Waddingham this is the age group for whom it’s most vital to lay the foundations leading to a stable financial future.
The company found that about a fifth of people (19%) had already looked to tackle the squeeze on their household finances by cutting out everyday luxuries such as streaming service subscriptions.
But it reported that the cost-of-living crisis was also beginning to impact on the ability of people to make financial plans.
Barnett Waddingham said that just over a quarter of respondents (26%) had admitted to dipping into savings to cope with price rises, as well as having to sacrifice their long-term financial plans.
The company warned that most people are not saving enough into their pensions in the first place and that “these developments could have a profound impact on [their] financial resilience”.
Barnett Waddingham’s Mark Futcher said: “The cost-of-living crisis has forced many people to take a long hard look at our finances. But while there’s clear merit in doing some financial spring cleaning, cutting back on financial planning commitments could have a dramatic impact on long-term financial wellbeing.”
He added: “At a time of significant financial hardship, it’s important that employers do their bit to help employees keep their heads above water. At a basic level this means providing stronger financial guidance for employees and encouraging them to think twice before making knee jerk decisions with their finances.”