State pension ‘not enough’ to retire on says financial advisor
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The COVID-19 pandemic has hurt the pension pots of millions of Britons, but people from certain groups have been more badly affected. This has led to calls for changes in the pension system which could allow people to access the state pension earlier.
It is believed that 20 million Britons were impacted by this, and with a worse financial situation overall, it is likely to be much harder to save for retirement.
Carers, disabled people and multiple job holders were more likely to have suffered job insecurity, which meant damaging knock-on impacts for their pensions.
The furlough scheme helped protect the workplace pensions of millions, but underpensioned people are more likely to be ineligible for automatic enrolment.
As a result, underpensioned are more likely to rely on the state pension when they reach retirement.
Tom Selby, head of retirement policy at AJ Bell, commented on the impact of the pandemic on people’s pensions, which he believes has only exacerbated an existing problem.
He said: “The cruel reality of financial crises is that the poorest in society are often hit the hardest.
“With COVID-19, this disproportionate impact on certain groups in society was not just felt in people’s pockets but also in the likelihood they would suffer serious health consequences from the virus.
“When it comes to saving for retirement, those on lower incomes or with less job security, such as the self-employed, already faced an uphill struggle before the pandemic struck.
“While the furlough scheme helped prop up the incomes and pensions of millions of workers, those who are already underpensioned were more likely to be ineligible for auto-enrolment.
“And with direct support for paying workers’ salaries now removed and the Omicron variant spreading fast, there is a real risk of more job security hitting these groups.”
Mr Selby explained: “An alternative reform option would be to allow people to access the state pension once they have reached a set number of years’ National Insurance contributions.
“This would potentially allow those who start working at a younger age – who proportionally tend to be those with lower life expectancies – to access the state pension earlier. However, this would also add cost as well as complexity to the system.”
Mr Selby stressed the need for everyone to take responsibility for their future and prepare in plenty of time for their post-working life.
He said: “For those who can afford it, saving early and often in tax-incentivised retirement savings products remains the best way to achieve security in later life.
“Sitting down and making a realistic budget, taking into account both short and long-term objectives, is always a good starting point, regardless of your financial position.”
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