Martin Lewis outlines pension scheme for 16-21 year olds
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It comes amid a time when many have found themselves experiencing financial strain due to the coronavirus pandemic. From pay cuts to job losses, COVID-19 has affected millions of people’s finances, sparking some to prioritise reviewing their financial future.
However, while it’s suggested some may use this time to review and update their retirement strategy, it seems this isn’t the case.
A recent survey from My Pension Expert found, among 1,281 UK adults aged 40 and above, just 22 percent had undertaken a detailed review of their retirement savings strategy within the previous 12 months.
Andrew Megson, executive chairman of My Pension Expert, spoke exclusively to Express.co.uk about the importance of pension engagement.
“The COVID-19 pandemic, teamed with interest rates dropping to historic lows of 0.1 percent have inevitably jeopardised people’s job security, and consequently their financial security,” he said.
“Indeed, in the final three months of 2020, the UK’s unemployment rate sat at 5.1 percent – an increase of 1.3 percent on a year before.
“As such, household finances will likely have been stretched like never before and families and individuals struggle to stay afloat on reduced income.
“With finances under such pressure, one would assume that people would revisit their retirement savings strategy, or at least check in with their pension savings and investments.
“However, this is not the case – it seems that may people simply do not care about the state of their retirement finances.
“Indeed, recent survey of over 1,200 UK adults over the age of 40, commissioned by My Pension Expert revealed that over the previous twelve months, an overwhelming majority (78 percent) of adults have not reviewed their retirement savings strategy.
“Worryingly, just 14 percent of over-40s have sought independent financial advice.
“Following these figures, it comes as little surprise that almost half (46 percent) of pre-retirees have not even checked how much they have saved into their pension pot within the previous twelve months.
“This lack of engagement is concerning, as it has the potential to cause serious financial damage later down the line.
“Indeed, failure to check in with one’s pension pot could mean that people don’t see that their savings or investments are not achieving the goals they need to.
“The sudden realisation of inadequate savings can cause people to make rash and ill-advised decisions in an attempt to rapidly restore the value of their pot.
“And this could cause even more damage to one’s financial situation.”
Mr Megson went on to discuss how pension engagement could be developed.
“It is vital that more is done to enhance people’s engagement with their pension,” he said.
“That said, it is not up to just one party to achieve this.
“It will require a holistic effort from the entire financial service industry – from advisers to life companies, and even the FCA itself.
“Together, the industry can develop a sustainable strategy to educate people about the importance of consistently engaging with their pension, as well as seeking independent financial advice when necessary.
“This could be achieved by making it easier for savers to check the health of their pension, through to removing the jargon when offering advice or discussing various investment options or retirement income products.
“Of course, consumer behaviour will not shift overnight – we cannot expect those over the age of 40 to suddenly start checking their pension pot over a monthly basis.
“However, by improving individuals’ access to pension pots, as well as financial advice, I believe we will begin to see a gradual improvement in UK pension engagement.”
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