Recent research by AXA has shown that as many as 1.5million people have considered suspending paying into their pension in the current climate.
In order to cut costs now, people appear to be willing to forego a few months of contributions into their pensions. Makes a lot of sense, and it’s actually something I’ve considered (I’m still considering in fact, although I am now more likely to reduce my contributions than cut them completely).
The research suggests that the cost of doing this could be as much as £30,000 in your pension pot when you reach retirement (that’s to say that you’ll have £30,000 less from which to take your tax-free lump sum and / or buy an annuity).
Of course, this is an average, and it will depend on the amount you contribute each month, how long you suspend contributions for and how long until you retire, but it could make a reasonable difference to the annual rate you get from your annuity.
Whilst retirement planning is important, you can’t really blame people for cutting back in this way when times are tight, especially if they’ve got plenty of years to retire – and therefore plenty of chance to makeup the difference. The one thing that’s made my mind up about continuing to contribute is that with the stock markets being so low, investing in them now should mean plenty of growth in the 40 years I’ve got until I retire.
But if I reached a point where I thought I could no longer contribute, I wouldn’t lose sleep over the possible income I’d lose in the future, I’d be more worried about keeping a roof of mine and my kids heads right now.
- Contactless Payments “Cause Brits To Overspend” (September 13, 2016)
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- RetireEasy: Pension Dashboard & Retirement Planning Tool (October 12, 2016)
- Royal London Money Manager Is Closing (September 1, 2016)
- Thousands Use Twitter To Complain About HMRC Phone Lines (September 9, 2015)