Cost of living crisis ‘threatening the state of pensioners’ – how to save your retirement | Personal Finance | Finance
A combination of rising energy prices, increasing tax bills and record high inflation could pull many British households to the brink of poverty as wages struggle to keep up. Emma Chee, Head of Wealth Management and Insurance Strategic Services at HSBC UK, shared exclusively with Express.co.uk what over 50s could do to protect their pension funds in the run up to and in retirement.
The cost of living crisis is battering UK pockets at a worryingly fast rate, with the most vulnerable groups in the population likely to be hit the hardest.
Research from The Food Foundation found that 8.8 percent of households experienced food insecurity within the first month of 2022, roughly 4.7 million UK adults.
Of this group, a further one million reported they or someone else in their household went an entire day without eating as they could not afford or access food.
These worrying statistics are just the start of the iceberg as April is due to bring a slurry of increases across the board.
Higher energy bills, increased council tax and National Insurance rates whilst inflation is predicted to peak at a potential seven percent is a cause for concern for many.
Alongside these rises, DWP benefits and payments like state pension are also due to increase in April, but only by 3.1 percent.
The average Briton enters retirement with £62,000 but these never-ending increases could see this lifetime worth of savings stripped away in a flash.
Ms Chee noted that while Britons must not feel downtrodden by thinking it’s too late to build up their savings, it does take “a good amount of planning to retire with financial security”.
She said: “The rising cost of living is threatening the state of UK pensioners’ retirement wealth. From energy and food to petrol and big-ticket items, we’ve all felt the sharp increase in costs, but pensioners are likely to feel the brunt of this rise as they don’t have means to top up their income once in retirement.”
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Due to the suspension of the triple lock mechanism, state pension payments this year will rise by 3.1 percent, trailing far behind the current inflation rate which “is leaving many pensioners struggling” according to Ms Chee.
Research conducted by HSBC UK showcased that seven percent of pensioners cannot afford their basic households bills and a further 26 percent cannot afford to run a car or private transport.
Inflation does have the potential to worsen these statistics as the cost of living rises, Ms Chee shared her top advice for those in retirement and in their final years of work.
She said: “Start by creating a budget so you can understand exactly where your money is going. Plan out your regular outgoings, and review where you’re spending most. Seek help if you need it and look at areas where you’re spending more than you need to.
“Could you change to a cheaper energy provider, is your telephone and broadband the right tariff for you? Don’t be afraid to shop around. It’s important to look after your money and get it working as hard as possible for you.”
For those still approaching retirement, Ms Chee highlighted that they should not feel “under pressure” to retire at any set age.
A somewhat new ideal of “semi-retirement” has seen many over 60s deferring their pension for a few years and continuing to work but at a pace “which offers a balance” between working full out and retirement.
Ms Chee added: “The more options you give yourself, the more you’ll feel in control of your financial future.”
Finally, retirees and workers alike could consider investing rather than saving as it has more potential for a bigger return than the current disappointing interest rates on offer.
Ms Chee explained: “Keep in mind that the value of your investments has the potential to go down as well as up, and there is a possibility that you may not get back what you put in. This has the potential to give your retirement pot a much-needed boost. Although you can’t rely on past performance, you can do your homework and understand how different funds have performed, should you decide to invest.”
She concluded: “There’s a lot of pressure around preparation for a comfortable retirement in your 60s, whether you’re looking to make that decision soon or work for a few more years. Remember, your financial situation may be different to your neighbours, which will impact the next steps you take.”
A DWP spokesperson told Express.co.uk: “The one-year move to temporarily suspend the triple lock ensures fairness for both pensioners and taxpayers. Combined with last year’s 2.5 percent increase to pensions – a step we took when earnings fell and inflation barely rose – we have ensured pensioners’ incomes have been protected.”
