Pension UK: Britons warned about ‘over-reliance’ on state pension – act now

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Pension saving is usually an endeavour undertaken years before a person actually plans to retire, and involves putting money aside for later life. But due to the existence of the state pension, many feel it is unnecessary to put additional funds away for life after departing the workforce. This, however, could be a fatal flaw, which leaves Britons woefully unprepared for their retirement and associated costs, experts have suggested.

Research undertaken by chartered accountants, Kreston Reeves, has shown a large number of people expect the state pension to amply support them in retirement.

Some 64 percent of those aged over 60 responded to the survey by stating they were relying upon the state pension to fund their retirement. 

Comparatively, only 33 percent of those aged between 35 and 59 said the state pension would be relied upon. 

An additional 32 percent of those aged over 60 believe they will have ‘just enough’ to fund their retirement. 

The prospect of the state pension providing the kind of support Britons ultimately need may be dwindling, according to the firm. 

Daniel Grainge, Partner and Head of Tax, provided insight into the matter.

He said: “Our survey points to an over-reliance on the state pension across all ages, which is concerning given that we can expect it to become less valuable over time and accessed at a much later age.

“Those aged between 35-59 are more likely to draw upon a wider and often complex pool of assets, and in an uncertain world, the need to regularly review finances, take independent advice and plan ahead has never been more important.”

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Undoubtedly, COVID-19 has created financial uncertainty for many people, some of whom are struggling to meet costs in the present.

However, particularly for those who have been able to save during this time period, for example, through lack of work related expenses, putting sums of money away is important.

This is because the earlier people choose to save, the more time the money put away has to build up and gain in value.

This is likely to provide Britons with a far better retirement outlook than if they had chosen not to put money away. 

At present, the new state pension sum sits at £175.20 per week.

However, it is worth noting the sum can vary dependent on the number of National Insurance contributions a person has made. 

Sarah Mannooch, solicitor and Director of Legal Services at Kreston Reeves, also commented on the findings.

She said: “We all need to consider and understand the financial future we want and need, and that must extend beyond pensions and investments.

“Our survey suggests that people believe the state will provide the level of financial and care support we need, but that is increasingly unlikely.

“It is important that we start to consider our long-term financial futures as early as possible to ensure the widest range of options are open, and we hope this report will help start those decisions.”

While workplace pensions can provide support, many may wish to explore personal pension saving options.

When doing so, Britons are actively encouraged to speak to a financial adviser about the matter.

They can provide tailored and individual advice to assist those who are making significant decisions. 

Furthermore, there are also a number of services likely to provide support for those examining pension savings.

Organisations such as the Money Advice Service, Pension Wise and the Pensions Advisory Service can offer insight into savings and what can be done with them. 

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