- Two in five say that money is the problem that most affects their mental health
- One in three has experienced a negative financial shock in the last three years.
- 58% of adults under 66 have had to stop saving or save less
Almost one in three people are spending savings or pensions ahead of schedule to cover household bills, new research suggests.
More than half of adults of all ages say the rising cost of living is their most pressing financial concern, followed by running out of money and not saving enough for old age.
Two in five said money is the issue most affecting their mental health, with one in three experiencing a negative impact on their finances in the last three years, according to an annual pensions survey by Interactive Investor.
More than half of adults say rising costs of living are their most pressing financial concern
The research, which questioned 9,000 people about their finances, was published after official data showed the inflation rate remained at 6.7 percent for the second month in a row.
The most common events that threaten people’s finances are illness of oneself or a family member, followed by layoffs and caring responsibilities.
Interactive Investor found that 58 per cent of adults under 66 have had to stop saving or save less, and almost one in four would like to save more for a pension but can’t afford the extra contributions.
‘The cost of living crisis is undermining the future of retirement. It’s stifling retirement savings,” says Alice Guy, director of pensions and savings at II.
‘It’s forcing people to postpone their retirement dreams. And it is causing many savers – retired or not – to look anxiously at their pensions and savings, worrying whether they will be enough. “Most of us are affected in some way.”
But Guy highlights a couple of positive findings: “Overall, older people appear to have been less affected by the cost of living crisis than younger generations.”
“Most have paid off their mortgages, many have built up decent retirement savings and all enjoy the benefit of triple-locking the state pension element of their retirement income.”
STEVE WEBB ANSWERS YOUR QUESTIONS ABOUT PENSIONS
Meanwhile, almost four in five adults have a pension, rising to nine in 10 people working full-time.
Guy adds: ‘Far from this being a generational battle, we are all on the same side, and many parents and grandparents make sacrifices to help the next generation and give generous “living inheritances” to their loved ones.
“For the lucky ones, parents and grandparents can do their bit to rebalance inequalities, but public policy measures are also needed.”
II urged the Government to consider a series of measures to help people improve their finances. These include:
– Maintain the triple blockade but reform the way it is applied to soften the measure, instead of focusing discussions on its elimination.
– Introduce an earlier state pension entitlement for those with age-related health problems.
– Consider increasing minimum pension contributions under automatic enrollment from a total of 8 per cent (4 per cent personal, 3 per cent from an employer and 1 per cent tax relief) to 12 per cent, with ambition to increase this figure to 15 percent. in the future
– Improve financial and pension education in schools and launch a public education campaign on retirement, focusing on key decisions such as how long a pension should last and the impact of withdrawing too much
– Distribute ‘wake-up packets’ at life stages such as starting work, birth of first child, age 40, age 50 and key retirement dates, with a one-page summary document.
– Help older generations support younger family members by increasing the £3,000 annual limit on gifting without incurring inheritance tax and introducing a higher annual capital gains tax exemption on gifts.
– Increase the £325,000 inheritance tax nil rate band in line with inflation and reform the additional £175,000 residence nil rate band to cover the childless and renters.
How to manage your pension if you fear it will fall short
1) If you are worried about whether you have saved enough, investigate your existing pensions. In general terms, it is necessary to ask the following questions to the schemes.
– The current value of the fund.
– The current value of the transfer, because there could be a penalty for the transfer.
– If the pension is a final salary or defined contribution regime. Defined contribution Pensions take contributions from both the employer and employee and invest them to provide a reserve of money at retirement.
Unless you work in the public sector, they have now mostly replaced the more generous gold-plated ones. defined benefit – average or final career salary – pensions, which provide a guaranteed income after retirement until death.
Defined contribution pensions are stingier, with savers bearing the investment risk rather than employers.
– Whether there are guarantees (for example, a guaranteed annuity rate) and whether you would lose them if you moved the fund.
– The projection of the pension at retirement age. You can use a pension calculator to see if you will have enough; They are widely available online.
2) You must add the expected figures to what you expect to receive in the state pension, which is currently £203.85 a week or around £10,600 a year if you qualify for the new full rate. Get a state pension forecast here.
3) If you’re tempted to merge your old pensions, read our guide first to make sure you won’t be penalized.
4) If you have lost track of the old pots, the The government’s free pension tracking service is here.
Be careful if you search online for Pension Tracking Service, as many companies using similar names will appear in the results.
These will also offer to look for your pension, but they will try to charge you or hit you with other services, and they could be fraudulent.