To ensure people can afford the life they choose after retirement, and don’t need to rely heavily on the state pension, it’s important for people in work now to start planning. Amid uncertainty around the amount of state pension each person could receive in the future, money expert Emmanuel Asuquo spoke exclusively with Express.co.uk and gave guidance for those in work right now.
He said: “If you are in a company, and they’re offering a company pension scheme, jump on it.
“Yes, there’s the whole thing that you can’t touch it until retirement, but when you think about it, how many investments can you put money in and know you’re going to get money on top straight away. You’re going to get instant growth.
“It’s one of the best investments you can make.
“So, if you put money in a pension, you’ll get 20 percent straight away [via tax relief]. That’s on top of your money straight away.
“If you’re a higher rate taxpayer paying 40 percent you can then claim the additional 20 percent, so for every pound you want to put into pensions, it’s only costing you 60p if you’re a higher rate taxpayer. That is wonderful investment.
“It’s in a tax efficient environment plus you have how much your work is going to contribute on top of that as well.
“So, if you have a workplace pension, definitely utilise that and put money in.”
His words of warning come as the state pension triple lock, a government guarantee which aims to help pensioners maintain their spending power over time as the cost of goods and services rises with inflation, will be temporarily suspended next year.
The Government said the average earnings growth figure would likely be artificially inflated due to COVID-19, so they therefore took the decision to ignore this element of the state pension triple lock for the 2022/23 tax year.
The terms of the triple lock are that the value of state pension must increase every year by the highest our of the rate of inflation, the rate of average earnings growth, or 2.5 percent.
The full new state pension is currently valued at £179.60 per week, affording eligible pensioners up to £9,339.20 each year. The full basic state pension is £137.60 a week, which means a total yearly income of £7,155.20.
For those thinking that this amount would not be enough for them to live off if they retired now, there are things to consider now to ensure a more comfortable retirement.
“I feel that with the cost of living, and how much people need, I don’t think a lot of people can put as much as they’d like into pensions to get them what they need at the end.
“Whether it’s rent, whether it’s mortgage or childcare – all of these things cost, and they limit how much you can actually save.
“What I’d say is make sure you have other investments available to you so that when it comes to retirement, you’ve got income from different places.”
The Government stressed that the suspension of the triple lock is purely a temporary measure, and the triple lock will return as normal from the 2023/24 tax year, but by failing to honour the policy on this occasion, a 2019 manifesto pledge has been broken.
It was the second manifesto promise broken in the same day, as Prime Minister Boris Johnson also announced that National Insurance would be increased, something the Government had committed to not doing during their most recent election campaign.