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New year, new pension

It’s a ‘happy new tax year’, Tomm Adams is thinking more about the impact on pensions

UK State Pension up by 8.5% this tax year, but don't spend it all at once…

It’s that time again, in the UK at least, for those of us who work in tax to wish our fellow colleagues a ‘happy new tax year’. But this year got me thinking more about the impact on pensions.

The UK State Pension’s ‘Triple Lock’ guarantee means that State Pensions have gone up 8.5% today – another huge increase as a result of high inflation in recent years, resulting in weekly entitlements of £221.50. This is welcome, although as the worldwide trend towards dwindling public resources for pensions continues, coupled with longer life expectancy, to what extent is this model sustainable?

Further, according to the Organisation for Economic Co-operation and Development’s (OECD) research in 2023, the UK State Pension’s income replacement rate for the average earner stands at only 21.7% versus an average of 49.5% in the European Union (EU27) and 42.3% against the OECD-38 countries. This woeful shortfall is only partially closed by the use of autoenrollment pensions (e.g. NEST Pensions).

More widely across Europe, further research across 15 countries shows the majority of individuals recognise that saving outside of mandatory pension plans (social security plus any mandatory occupational plans) is required to maintain a decent standard of living. Yet two-fifths of those surveyed are not saving, with lack of disposable income cited as a key reason.

For me, the warning is clear: employers must empower their employees to make better choices and secure a prosperous post-retirement lifestyle. This is achieved through financial education initiatives and a decent retirement programme within their suite of employee benefits.

Would you like to know more?

If you would like to know more about employee pensions and benefits programmes, please get in touch with your usual Blick Rothenberg contact or Tomm using the form below.

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