A new report has revealed that millions of people are facing a worrying future when it comes to their pensions, and it’s women in their 50s who are most at risk.
The report, by Phoenix Insights, shows that 59% of people who have defined contribution pensions, where your retirement income depends on how much you save, won’t have enough to live on when they retire. This is a huge problem, especially for women born in the 1970s who earn less than £80,000 a year.
Why are these women missing out?
- Missed out on the good old days: These women missed out on the more generous defined benefit pensions that their parents and grandparents had, where your pension was based on your final salary.
- Auto-enrolment came too late: They also missed out on the benefits of auto-enrolment, where money is automatically taken from your wages and put into a pension pot. This was only introduced in 2012, for younger workers.
The “undersavers” will leave the workforce between 2040 and 2044, which is a big problem for the pension system.
What’s the problem?
These women are likely to retire between 66 and 70 and will need to rely on their pension savings. But the report says many will not have enough to cover their basic needs.
The experts say we’re heading for a pensions crisis, with millions of people retiring with less than they need to live on.
What Does the Future Hold?
The new Chancellor, Rachel Reeves, might be planning to shake up the pension system.
Two changes could hit your retirement income:
- Tax-free lump sum: You can currently take 25% of your pension as a tax-free lump sum when you retire. Some experts are worried that this might be cut, or a limit might be placed on how much you can take out before you start paying tax.
- Pensions tax relief: You get tax relief on your pension contributions, so you don’t pay tax on the money you put in. This could change, with a flat rate of relief for everyone instead of the current system where higher earners get more relief.
These changes could leave many people with much less money than they thought they would have when they retire.
What Can You Do?
It’s never too late to start saving. Even if you think you’ve left it too late, there are things you can do to boost your pension:
- Review your current savings: Speak to a financial advisor or check your pension statements.
- Increase your contributions: If you can afford to, put more money into your pension each month.
- Consider a personal pension: If you haven’t got a workplace pension, look into setting up a personal pension.
Even a small amount can make a difference in the long run.
And remember, it’s never too late to make changes to your finances to ensure a comfortable retirement.