Providing the state pension is set to cost the government billions more in years to come. The cost of the single-tier state pension will surge by £344billion between 2013 and 2063, according to figures published last week by the Office for National Statistics (ONS).
Total public expenditure on state pensions, including pension credit and the winter fuel payment, is expected to rocket from £94billion to £438billion over the 50-year period.
The figures came in the wake of the Autumn Statement, in which Chancellor George Osborne announced the government’s decision to raise the state pension age faster – to 68 in the mid-2030s, 69 in the late 2040s and to 70 after 2050.
Despite such sweeping changes to state pension provision, research from Aegon shows that three-quarters (74%) of people in the UK have not received pension advice and a third of those close to retirement have no active retirement plan in place.
Saving for any event requires careful planning, but one of the biggest financial events in your life is retirement. It is so important to plan ahead for this and make sure that you are on track to achieve the type of retirement you would like and, more importantly, the level of income you will need.
There are a whole host of reasons why you should seek pension advice and make plans for your retirement. The pensions market has changed dramatically over the last 25 years: in 2001, stakeholder pensions were introduced; five years later, pensions “simplification” brought sweeping changes to the retirement savings market, while more recently the introduction of workplace pensions and auto enrolment have brought further change.
Next year will herald changes to the lifetime allowance – the maximum you can save into pension funds over your lifetime – while the government has proposed to introduce a flat rate state pension from April 2016. This is expected to be £144 per week. Could you live on that amount alone?
If you have no active retirement plan in place it is time to address this pressing issue before it is too late. If you have started saving and planning for retirement it is still wise to seek advice to get the most from your retirement savings and ensure these are sufficient to meet your desired lifestyle in retirement.
Do you know how your pension fund is invested? Is your money invested correctly? How much is your pension provider charging you every year? How much income will you need in retirement and how much are you likely to have?
These are all questions you should be able to answer. If you are unable to answer any of these then advice is crucial.
With proper financial planning you can look at all aspects of your financial life to ensure that all of your savings, investments and insurance policies are appropriate, fit for purpose and working together properly to achieve your financial objectives.
Financial planning is not just for the wealthy; it is for everyone. By planning your finances more effectively you will have greater control over your life – both now and in retirement – as well as improved peace of mind.
Keith Mackie is a certified financial planner at Acumen Financial Planning