The cost of delaying your pension planning could require a massive increase in contributions, to attain a specific pension income in retirement, according to new figures released this month.
In order to achieve a pension income of £10,000 per year, based on buying a level pension annuity at age 65, here is how much individuals would have to save, over their lifetime to age 65, either in private pension schemes or company pension schemes.
Age 20: £125 per month
Age 30: £195 per month
Age 40: £330 per month
Age 50: £660 per month
Despite the clear danger of jeopardising your pension income and retirement planning by holding back or delaying pensions saving, employee contributions to private pension schemes and company pension schemes fell by over £1bn in 2008/09, to £5.26bn from £6.29bn the year before, according to HM Revenue & Customs (HMRC).
This radical neglect of pension planning has been attributed to savers economising as the recession took hold, but experts predict that a lapse in retirement planning of this magnitude will have repercussions for pension income further down the line, unless savers can make good their missed contributions.
Pensions adviser Hargreaves Lansdown has claimed that this apparent temporary abandonment of retirement planning might have been reduced, if Government had provided greater flexibility in how and when employees can draw cash out of private pension schemes and company pension schemes.
“Faced with uncertainty over future earnings, it is understandable that some chose not to save into a pension, in case they needed the money in a hurry,” said Laith Khalaf of Hargreaves Lansdown.
While the Conservatives are known to favour increased access to pension income, the Liberal Democrats actually made this a pledge in their election manifesto.
“Hopefully this policy will find its way into the new government’s legislative agenda,” Mr. Khalaf said.
