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Don't take a pension payment break

Pensions: Taking a payment break should be a last resort, savers warned

Tuesday 18 November 2008

Writes Seamour Rathore
seamour.rathore@consumerchoices.co.uk

Millions of Brits plan to manage the recession by taking a break from contributing to their pensions, but it could be a disaster for their retirement fund.

Around 1.5 million Brits are considering not paying into their pension schemes in an effort to make ends meet during the recession. Financial services giant AXA (www.axa.co.uk) says that as much as £34.97 billion could be lost from 1.5 million pension funds if contributors stopped paying-in for two years.

Steve Folkard, head of pensions and savings policy at AXA said: Taking a pension break should be a last resort because of the long-term repercussions. If you put £300 a month less into your pension for two years you will have a pension pot that is tens of thousands of pounds short when you retire.”

In separate research, financial services company The Hartford (www.thehartford.com) found that 59% of over 45s were more worried about making ends meet during retirement than having a good time. A year ago when asked the same question 47% named enjoying their retirement as their main concern.

Marc Lieberman, president and chief executive officer of Hartford Life said: “People facing retirement need to have the right tools in place. Property values are falling and cannot therefore be relied upon for providing a retirement nest egg. People must do whatever they can to start saving for retirement as soon as possible.”

• Start planning your retirement early – the earlier the better and consult a good financial adviser
• Diversify investments – spread your risk over various different products such as bonds, equities, government debt to protect yourself
• Protect and grow your retirement income – If you are in or approaching retirement look to lock-in your income and investment returns

Chris Eagle, commercial manager at CreditChoices.co.uk said: You should resist the urge to stop paying into a pension even though times may get very tough. The cumulative effect of growing your pension pot will far outweigh the short-term easing of everyday finances. Try to cut costs instead by making sure any debts on credit cards and loans are on the best rates you can get."

"It could also pay to look at your energy tariff, your broadband package – switching could result in considerable savings.”

Click here to Compare Credit Cards

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