Legal & General has warned that people need to put more money into their self-invested personal pensions and small self-administered scheme funds. The company believe that the government will not increase the value of the state second pension, so making additional savings in other pensions and investments essential.
The National Pensioners Convention held rallies recently in protest at the declining value of the state pension. It is calling for the basic state pension to be raised from £84.25 to at least £114 per week. Legal & General believe that the State Second Pension (S2P), which started out as an 80th scheme as SERPS (i.e. you get 1/80th of your salary as a pension), will be a 245ths scheme by the time people retire from Serps in 2028 i.e you will only get 1/245th of your salary each year i.e. reduced by two thirds.
They also believe that savings in personal pensions should be scaled according to age. People who start saving in their 20's should contribute 10% of their salary, those in their 30's, 15% and those in their 40's and 50's, 20%.
Our view
The only people you can really rely on is yourself. State pensions are good and the saviour of many in retirement but people need to take their own retirement planning more seriously.
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What is the State Second Pension and SERPS?
Visit the Pensions Adviser.com State Pensions Centre.