More people raiding savings and take pension cash early to make ends meet, report suggests

Nearly one in three people are spending savings or pensions ahead of schedule to keep up with household bills, new research shows.

More than half of adults of all ages say the rising cost of living is their most pressing financial concern, followed by running out of money and not saving enough for old age.

Two in five say money is the issue most affecting their mental health, and one in three have experienced a negative shock to their finances in the past three years, according to an annual pension survey from Interactive Investor.

More than half of adults say the rising cost of living is their most pressing financial concern

The survey, which asked 9,000 people about their finances, was published after official data showed inflation remained at 6.7 percent for the second month in a row.

The most common events that threaten people’s finances are their own or a family member’s illness, followed by redundancy and caring responsibilities.

Interactive Investor found that 58 percent of adults under 66 have had to stop saving or save less, and almost one in four would like to save more for a pension but can’t afford the extra contributions.

‘The cost of living crisis is undermining the pension future. It is stifling pension savings,” said Alice Guy, head of pensions and savings at II.

‘It forces people to postpone their retirement dreams. And it’s causing many savers – whether retired or not – to look anxiously at their pensions and savings, worrying whether they will be enough. Most of us are affected in some way.”

But Guy points to some positive findings: ‘In general, older people appear to be less affected by the cost of living than younger generations.

‘Most have paid off their mortgages, many have built up decent pension savings, and they are all benefiting from the triple lock on the state pension element of their pension income.’

Meanwhile, almost four in five adults have a pension, rising to nine in ten people who work full-time.

Guy adds: ‘Far from a battle between generations, we are all on the same side, with many parents and grandparents making sacrifices to help the next generation and giving generous ‘living legacies’ to their loved ones.

‘For the lucky ones, parents and grandparents can do their part to rebalance inequality, but this also requires government policy.’

II called on the government to consider a range of measures to help people improve their finances. These include:

– Keep the triple lock, but reform the way it is applied into a flattened measure, rather than focusing discussions on its abolition

– Introduction of earlier rights to a state pension for people with age-related health problems

– Consider increasing minimum pension contributions under automatic enrollment from a total of 8 percent – ​​4 percent personal, 3 percent from an employer and 1 percent tax relief – to 12 percent, with the ambition to increase this to 15 percent in the future

– Improving financial and pension education in schools, and launching a public education campaign on pensions, focusing on key decisions such as how long a pension should last and the impact of taking too much

– Distributing ‘wake-up packs’ at life stages such as starting work, birth of a first child, age 40, age 50 and key retirement dates, with a one-page summary document

– Helping older generations help younger relatives by increasing the £3,000 annual limit on giving away gifts without paying inheritance tax, and introducing a higher annual exemption from capital gains tax on gifts

– Increasing the £325,000 nil rate for inheritance tax in line with inflation, and reforming the £175,000 additional nil rate for homes to cover people without children and renters.

How do you arrange your pension if you are afraid it will fall short?

1) If you are concerned about whether you have enough saved, examine your existing pensions. Broadly speaking, you should ask schedules the following questions.

– The current fund value.

– The current transfer value – because there may be a penalty associated with a move.

– Whether the pension falls under a final salary or defined contribution scheme. Defined contribution Pensions take contributions from both the employer and employee and invest them to provide a pot of money upon retirement.

Unless you work in the public sector, they have now largely replaced the more generous gold plating defined benefit – average career or final salary – pensions that provide a guaranteed income after retirement until your death.

Defined contribution pensions are more meager and savers bear the investment risk, rather than employers.

– Whether there are guarantees – for example a guaranteed annuity – and whether you would lose these if you were to move the fund.

– The pension projection at retirement age. You can use a pension calculator to see if you have enough. These are widely available online.

2) You must add the forecast figures to the amount you expect in state pension, which is currently £203.85 per week or around £10,600 per year if you qualify for the full new rate. Request an AOW forecast here.

3) If you’re tempted to merge your old pensions, read our guide first to make sure you don’t face a penalty.

4) If you’ve lost track of old pots, you can use the The government’s free pension tracking service is here.

Be careful when searching online for the Pension Search Service as many companies with similar names will appear in the results.

These also offer to look for your pension, but try to charge or flog you for other services, and this can be fraudulent.