The rules around pensions in the UK have developed and changed a great deal over the years. Pensions today are very different to what they were, and some of the most radical changes have occurred in the last few years.
But new research shows that pension savers are becoming concerned with the frequency of these changes. Here’s the lowdown.
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What does the research tell us?
According to a survey of 250 savers by Hargreaves Lansdown, when asked what their biggest concern about pensions was, 30% said that it was the constant tinkering with rules.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, points out that pensions are a “long-term game” for many. So, it’s only natural for them to be worried by the constant tinkering, as rule changes affect their retirement planning.
Some of the most recent changes to pension rules are the reduction (and subsequent freezing) of the lifetime and annual allowances, as well as the introduction of tapered and money purchase annual allowances.
Morrissey points out that the majority of these changes have been implemented at short notice. This has potentially left savers with little time to prepare or make changes to their retirement planning strategy.
Many changes, according to Morrissey, have also been done in a “piecemeal fashion” rather than as part of an overarching strategy.
In the future, she recommends that any changes “be done as part of a wholesale considered review rather than tinkering around the edges and the unintended consequences it brings”.
Apart from the tinkering with rules, savers in the survey revealed that other big worries are investment volatility and not contributing enough.
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How can savers cope with their pension concerns?
Here are four tips from Helen Morrissey to help take the stress out of your retirement planning.
- In recent years, the government has reduced and then frozen the annual allowance for pensions, so keep an eye on your contribution levels to ensure they aren’t breaking the rules.
- Like the annual allowance, the lifetime allowance has been reduced and then frozen in recent times. If you feel like the lifetime allowance might be an issue for you in future, it could be worth speaking through your options with an adviser. They will look into your situation and tell you the best course of action. It could mean ceasing to contribute so as not to exceed your allowance. Or it could mean continuing to contribute and paying any charge (if the benefits of doing so outweigh those of staying within the allowance).
- It can be unsettling to see the value of your fund fall due to volatility. However, keep in mind that this is a normal part of the market cycle. Markets can rise and fall in the short term. But in the long run, they almost always recover, which will enable your pension to recover too.
- Feel like you are not contributing enough to your pension? Take advantage of special events such as a pay rise or a change of job to increase your contribution. Even small increases can add up over time. Some employers will also increase their contributions if you increase yours.
How else can Brits save for retirement?
Constant pension rule changes can make it hard to plan ahead with confidence. The good news is that pensions aren’t the only way to save or invest for retirement.
A stocks and shares ISA offers another tax-efficient way to invest for the future and can supplement your pension. Each year, you can put up to £20,000 in your stocks and shares ISA, invested in a wide range of investments, and enjoy tax-free growth and income.
You can open this ISA with a variety of providers, including banks, building societies, stockbrokers and credit unions.
Be sure to compare different options first to get the stocks and shares ISA that best suits your needs. The Motley Fool has compiled a list of top-rated stocks and share ISAs to help with this.
And, if you have any more concerns about your pension, you can contact Pension Wise, the government-backed service for free and impartial guidance.
