Pension savings in Britain could be about to undergo another drastic change, even greater than the one made by Chancellor George Osborne last year, in the forthcoming Spring Budget. Financial commentators are speculating that he is planning to "raid the pension pots of middle class savers" by removing higher rate tax relief on pension contributions. Indeed, it has been speculated that Mr Osbourne would like to scrap all tax relief on pension contributions and replace it with an ISA-style system.
Whilst the expected Budget announcement would seem to largely affect future pensioners, current pensioners, or those soon to retire, could also be impacted by the prospect of reduced tax relief on pensions savings. With any pension reforms, it is imperative that retirees and those close to retirement take time to understand what it means and how it affects their longer-term retirement plans.
The pension changes the chancellor brought in last year revolutionised options for pensioners, giving them more control over their retirement funds. However, there was confusion among retirees about how to best manage their pension pots after the new freedoms came into effect. In addition, whilst the changes brought increased flexibility, it also brought a heightened potential risk for pensioners running out of money. For this reason, there was an even greater need for people to seek advice and become better informed about how these changes affected them.
In light of this, it was rather worrying to find that in our most recent Silver Census, a nationwide survey of over 1,000 people aged 65 plus, over half (54%) of the people surveyed had never sought financial advice to better understand their pension options.
The survey findings also showed that nearly one in five (19%) of people 65 and over believed that they will not be financially secure throughout their whole retirement, while almost a quarter (24%) stated that their current financial situation was worse than they thought it would be aged 45.
Thirty-one per cent of people surveyed who are still working have continued to do so past the age of 65 because they simply do not think that their pension pots will give them a good enough income in retirement.
Successfully planning a comfortable retirement is not easy, but it is essential to try and mitigate against financial worries in later life. Having worked and saved hard, people reaching retirement age should be looking forward to the next stage of their life with eager anticipation. It is a time to try new and different things. It is also a time to enjoy grandchildren, having more time to spend with them - offering both guidance and companionship. Younger generations have a lot to learn from older people.
However, financial hardship can make retirement a particularly difficult time. That is what makes these survey results most alarming. There are too many people over 65 who have not sought advice and are fearful of their financial situation throughout the whole of their retirement years.
With further pension changes likely to be announced in the Budget on 16th March, it has never been more important for people to seek information about how they will be impacted by current and future pension reforms.
The Budget announcement could potentially alter the future retirement funds of millions of Britons at or close to retirement. We hope that the Chancellor will consider the consequences for current retirees and keep in mind the great contribution so many older people have already made to the nation throughout their working lives.