The UK's top newspapers are screaming out about Britain's economic downturn. In particular, over the last few months there has been a general consensus of how the depressing state of our economy is exacerbating a looming pension crisis. On top of this, many of us now face the real threat of redundancy. For those of us fortunate enough to rely on the steady income of a job, there seems to be a growing number of friends or acquaintances who are being forced out of work by their employers.
Many of us are really feeling the pinch as households struggle more than ever to keep up to check with their personal finances. The combining number of factors including rising utility bills, higher inflation and pay freezes means that we have less disposable income than ever.
Employers also have had to make cuts, unfortunately resulting in the very real threat of redundancy for thousands of workers. Redundant workers, quite rightly, have enough on their plates already than to also worry about contributing to a pension fund which they may have set up whilst in employment.
But rather than tighten the purse strings and sacrifice a few guilty pleasures, people, both in and out of employment, are now opting-out of contributing towards their pension fund. A report by the Office of National Statistics suggests that over the last four years a million people have pulled out of their personal pension funds in order to compensate for a lower disposable income. Whilst this decision may alleviate pressure on personal finances in the short-term, it poses great problems in the future when individuals want to retire.
Why is this is resulting in a pension-panic for the future?
Pension advice experts have already questioned whether the current contribution of 8pc of your salary is enough to produce a pension which you can actually live off. Irregularly contributing to your pension fund, or worse still opting out of a fund all together if you are made redundant, leads to big problems in the long-term.
It may mean that you may have to work longer, forcing you to retire later out of financial necessity. Your retirement income may also be significantly lower than what you had hoped for, affecting your quality of life in retirement; a time that you have worked hard to enjoy. It may be worth receiving pension advice to see what steps you can take now to avoid what Lord McFall of Alcuith, the former chairman of the Commons Treasury Select Committee and chairman of the Workplace Retirement Income Commission (WRIC), calls a "bleak old age" in retirement.
A Vicious Pension Circle? Sounds scary.
It is. Many companies are forcing redundancy onto their employees not only because of a need to make financial cuts during a recession but because their employees are wanting to work longer to make up for their smaller pension pots. We are faced with a vicious circle; due to increased costs of living it is harder to save for future pensions, but we need a larger pension fund to cover the increased cost of living. The cost of living for pensioners is also up because they spend more money on food and energy bills such as heating. Coupled with increasing food and energy, rising inflation means that pension payout rates are also crashing. Because of this it is best to seek immediate pension advice about how best to avoid major problems in the future.
What's the best decision to make?
Take control of your retirement pot. As a nation we worry that taking control of finances can be seen as a greedy trait. It couldn't be further from the truth. Taking responsibility of your savings and forward planning safeguards you and your family's standard of living in the future. During any economic recession, it is important to re-prioritise your finances. Is that expensive meal out really worth compromising your future pension fund for? Of course, it doesn't mean cutting out all of life's pleasures but many of us will have to re-balance the contributions to our savings, including our pension fund. Before making any rash decision involving your pension, talk to a pension advisor and see what options are available. Seeking pension advice to chose the best pension policy for you is a start but you should also regularly review your policy, making sure your money is working the hardest it can for you.
John T Hughes writes for Independent Financial Advisor, a service that connects consumers to financial advice they can trust, from pensions and annuities to mortgages, investments and savings.
Article Source:http://EzineArticles.com/?expert
0 comments:
Post a Comment