Pension alert: Savers urged to ‘boost’ their pots as savings levels skyrocket – has yours?
Budget 2021: Sunak announces pension lifetime allowance freeze
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Pension contributions are, for most people, essential for a comfortable retirement and various Government efforts have been put in place to encourage savers to add to their pots. This includes automatic enrolment rules and tax relief perks but even with these, people may find it challenging to find spare cash to add to their pots.
However, recent data shows coronavirus has, despite its economic damage, created a unique opportunity for many savers.
This week, the ONS released Family Spending Statistics and Eleanor Levy, a Director at NOW: Pensions, examined the data: “[The] ONS Family Spending statistics show that average weekly spending was down in 2020 on 2019’s figures.
“Further figures confirm that over the past year of lockdowns, lack of spending opportunities have boosted savings, with £125billion now in UK savings accounts— more than £4,000 per household on average.”
Eleanor went on to urge savers to utilise some of this built up money for their pensions.
She continued: “Now is a great time for people to consider giving their pensions a boost with these extra savings accrued over the past year.
“While we understand the importance of easy access savings for many, there are significant benefits of saving into a pension including compound interest, investment growth and tax relief.
“Consider putting away a portion of these savings into your pension or, if you are already contributing via auto enrolment, think about increasing your minimum contribution by a percentage or two.
“The sooner you start saving the easier it is to build up an adequate savings pot for later in life and your future self will thank you for it.”
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There is some evidence that workers and savers across the UK have made changes to their retirement plans in the face of the pandemic.
Recently, Netwealth conducted a survey of 2,041 UK adults aged 35 and over and examined an FCA Financial Lives Survey.
Their research found that in response to a drop in income and the emergence of financial anxieties, many people aged between 35 and 64 made changes to their pension plans or intend to do so over the course of the next year.
The most popular changes made by those aged between 35 and 44 included increasing regular contributions to their pension pots (15 percent).
Charlotte Ransom, the CEO of Netwealth, commented on this: “The pandemic has led to increased and often competing financial pressures with many feeling the squeeze more acutely during the latest lockdown.
“This, combined with the renewed perspective the virus has given many of us, has led to a significant uptick in people thinking more holistically about their futures.
“It is encouraging that the concerns highlighted have been met with a proactive response from many looking to take control of their financial futures.
“While the COVID-19 pandemic has undoubtedly thrown many people off course with their finances, having a long-term ‘life plan’ is an important tool to help those currently unsure of how they can still achieve key milestones and financial goals over the course of their life.
“For those who find it too early to be thinking about needs in later life, particularly given more current pressing financial issues, it is worth remembering the value of planning for the future while there are still many years of employment ahead before retirement.
“We recommend the notion of a ‘life plan’ for all ages – a flexible tool which adapts to your changing needs and provides a framework to build long-term financial resilience, taking into account the potential for hostile savings environments over time.”
Rishi Sunak recently made changes to pension rules in his 2021 Budget, with the Chancellor announcing he will freeze the lifetime allowance.
The pension lifetime allowance is currently set at £1,073,100, the amount people can put into their pensions and still get tax relief on.
However, these changes are believed to only benefit high earners and the Chancellor made no changes to the annual allowance, which is currently £40,000 per year.
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