Paying for the ‘here and now’ as living costs rise can make planning for later life seem even more difficult.
Around three in five people say they feel stressed when thinking about retirement planning, and seven in 10 are concerned their retirement funds won’t be enough, according to new research from Aviva.
With bills on the rise, Lucy Carter, 49, says she can’t afford to put a lot into her later life savings right now. “I can’t put a lot into a pension pot, as I need most of my wage to live on,” says Carter, who lives in York and has two teenage children.
“I understand that paying more into your pension each month is the best idea, but how can you do this when I need my wage to actually live on? I would like to start saving, but the cost-of-living at the moment means I can’t.”
Ros Donaldson, from Edinburgh, who has an adult son, is also concerned about her longer-term finances. The 55-year-old says: “I haven’t checked my pension recently, so I don’t know how much I already have saved, or how much I’ll have in my pension pot when I come to retire. I should probably check.
“One thing I do know is that I’ll need to save more over the next few years if I want to have the lifestyle I desire in retirement. It’s that, or I’m going to have to work longer before I can put my feet up.”
Meanwhile, 27-year-old Elle Mackenzie from London, says: “I currently have no pension plan – so I’m worried that I will never start and then not have anything when I need it.”
Mackenzie, who saves into a Lifetime Isa (which can be used to help buy a first home or for retirement), says: “I’m a probably still 40 years off retiring so I’m not too concerned at the moment – I guess it’s something you always think is years away and you can start tomorrow, but if I keep going at this rate, I’m not going to have much saved at all.”
Alistair McQueen, head of savings and retirement at Aviva, says: “With inflation at a 41-year high, it is understandable that many are working hard to make ends meet.
“Cutting back on ‘non-essentials’ is where we typically turn to make savings. But we should think carefully before putting our pension on this list.”
Giving some general tips, he suggests getting a free state pension forecast from Department for Work and Pensions as a starting point (gov.uk/check-state-pension).
Pension providers also have free online retirement planners, which could help with understanding the impact that any changes made now could have on long-term finances.
People could also consider dialling up or down the amounts saved into pensions each month – so if you’re finding saving tough right now, you could temporarily reduce your contributions – rather than stopping completely.
McQueen emphasises it’s important to remember to increase your pension contributions as your situation improves.
Younger adults may find that even if they only save small amounts initially, the interest earned will grow significantly over time.
For people in midlife, McQueen suggests possibly considering consolidating pensions in one place. Over-50s can book free guidance sessions with the Government-backed Pension Wise service (available via moneyhelper.org.uk). Some people may also benefit in the longer term by paying for financial advice.
