The Pensions Policy Institute has researched the recently introduced Pension Credit to see whether certain groups of people would be better off NOT saving for their retirements. Apparently, if someone saves 20% of salary between the ages of 41 and 65, they will lose a third of what they save by not getting the pension credit. These figures were used because to get the maximum pension allowed of 2/3rds salary, a person of 41 would need to save 20% of their income.
Our View:
The introduction of the Pension Credit has made it even harder for a person to plan for retirement. The pension system in the UK is complex and whilst it is being reviewed and simplified, this does not help savers and retirees in the meantime. For some people on lower to middle earnings, everything they save for in a pension would have been given to them by the Pension Credit. In effect, they could have spent the money elsewhere to receive the same benefits. For those saving towards retirement, you really must take advice regarding how best to save. Whilst you will probably have to pay for the advice, at least you will have a clear understanding of your retirement options.