The concept of a state pension is something that previous generations of workers have often relied on, as they have looked to enjoy a comfortable lifestyle once their professional careers have ended. We have recently seen a number of macroeconomic events and government proposals that have changed the financial landscape, however, creating significant issues for the workforce and their fiscal futures.
Not only has the typical retirement age for men and women increased incrementally in recent times, for example, but Chancellor Philip Hammond’s recent autumn statement also included a crackdown on pension-related tax relief. With these trends set to continue amid an uncertain economic backdrop, it is becoming increasingly clear that individuals will need to take charge of their own finances if they are to enjoy a suitable retirement.
A Look at the Latest Pension Cuts and the Steps That You Can Take to Negate Them
The latest cut was made to the annual pension allowance, which has typically served as a government top-up, for anyone aged over 55 who wanted to withdraw income from their state fund. This innovative form of tax relief is set to be slashed from April next year, however, with the annual money purchase allowance falling to just £4,000. This move marks a huge change in direction for the UK government, who as recently as 2015 introduced new pension freedoms and advantages that many leveraged to pay off their mortgages and help their children to invest in real estate.
These new restrictions represent a 60% drop in less than 2 years, however, and this is likely to hit savers particularly hard.
With this in mind, the question that remains is how can savers negate these changes? Undoubtedly, the government is responding to an austere and volatile economy by imposing these state pension restrictions, and this is compelling workers to take charge of their own financial futures. This means assuming greater control of your money and financial management plans, while also seeking out creative savings and pension initiatives that can deliver greater returns and freedom.
One of the best options in the current climate is to seek out managed portfolios and SIPPs (self-invested personal pensions), which enable you to assume control of your future and potentially achieve a superior ROI over time. These initiatives offer you access to a host of potential assets and investments, while each portfolio is managed by financial experts and tailored to suit precise risk portfolios. In certain SIPPs, individuals can save up to 0.3% per annum through the elimination of fees and commissions (which can then be reinvested into a more diverse and lucrative pension pot.
Service providers such as Tilney even combine managed portfolios with strategic, financial planning advice, which ensures that all asset classes and strategies are compatible with your future fiscal goals.
The Last Word
There is no doubt about it; the recent state pension changes will ultimately create an older workforce and reduce the amount of income that people have to live on during their retirement. While this presents a challenge, however, it is also a unique opportunity for us as individuals to take control of our financial planning and explore the wealth of innovative products that can help us to increase our pension funds. By taking charge, comparing the market and embracing flexible options such as SIPPs, you can negate state pension cuts and still look forward to a lucrative and relaxing retirement.