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Did you know that the UK celebrated its Pension Awareness Day on the 15th September 2020? If it skipped past you, then you are not alone. Much of the media attention on COVID-19, trade disputes and other matters have largely obscured this important day from the public. Yet it has arguably never been more vital to hear the message of Pensions Awareness Day, namely: “Are you saving enough money for retirement?”
The sad answer to this question is that many people are not. Here at WMM, our Oxford-based financial planning team is striving to be part of the solution to this problem. In 2020 and in the years ahead, it is now likely that an individual’s retirement will span more than 30 years (as opposed to perhaps less than a decade in the 1900s – when the state pension was introduced). This means that people’s pensions will likely need to stretch further. Yet a UK government report suggests that as many as 12m people have little or no pension savings at all.
People and pensions are changing
Many people in the UK seem to assume that the state will simply look after them when they get old – much like the NHS is expected to provide free care when they get sick. Unfortunately, this assumption is not correct. In 2020-21, the full new state pension provides £175.20 per week – a sum which most cannot reasonably live on by itself.
Another complicating factor in all of this is the fact that the pensions landscape is changing. In the recent past, many workers would have access to a defined benefit (or “final salary”) pension which paid a guaranteed income in retirement until death. This – in combination with your state pension – was often enough to live on comfortably, indefinitely. In 2020, however, this kind of pension is increasingly rare. More commonly, workers now have a defined contribution pension which involves building up a pot of money for retirement. Whilst this offers advantages over a defined benefit pension, it does leave open the possibility that you might run out of money without careful retirement planning.
Lack of awareness and understanding
One of the big challenges that financial planners must help people overcome is the complexity of pensions. Many people feel intimidated by the subject and so delay the decision to start thinking seriously about it (by which point, much valuable time for saving has been lost). One survey by the ONS, for instance, suggests that only a minority of 35-44 year olds agree with the statement: “I feel I understand enough about pensions to make decisions about saving for retirement”. Older survey respondents also showed disturbing results, with one-fifth of 45-year olds saying that they thought their pension would not meet their expense requirements when they retired. Around 10% said they were unaware if they had saved enough, or not.
Financial planning for everyone
Retirement planning and pensions is not simply for the “super rich”. Everyone needs to think about how they will meet their financial needs in their 50s, 60s and beyond. Some will want to keep working, yet most will want to retire in some fashion. Here, the message of Pension Awareness Day invites you to reach out to a financial adviser/planner and to take early steps to prepare for your future. At worst, you spend some time discussing some of your options with a professional during a free consultation and then go on your merry way. At best, you chart a course together which moves you towards an inspiring set of financial goals in retirement.
Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469