Pension savers warned withdrawing cash as inflation soars to 5.4 percent | Personal Finance | Finance

Pension saving is often considered vital for retirement, as the state pension is increasingly viewed as a safety net. But while saving can be sensible, people should also be considering key pension rules – particularly in the current challenging environment. Yesterday, the Office for National Statistics (ONS) confirmed the Consumer Prices Index level of inflation had soared to 5.4 percent in the 12 months to December.

This represents prices rising by their fastest rate in nearly 30 years. 

With inflation running high, there are impacts for pension savers which need to be considered.

Coupled with this staggering increase, interest rates still remain low, impacting Britons in yet another way.

It is no longer advantageous for individuals to hold all of their money in cash, and therefore other options should be weighed up.

READ MORE: Could state pension be means-tested? ‘Disadvantage risk’ considered

As the expert highlights, having an understanding of the MPAA is key for those accessing their pot. 

MoneyHelper, the Government-backed service, explains: “If you start to take money from a defined contribution pension pot, the amount that can be contributed to your defined contribution pensions while still getting tax relief on might reduce.”

Most people will be able to contribute £40,000 to their pension each year while receiving tax relief.

However, they could trigger the MPAA if they start to take lump sums from their pot. 

If the MPAA is triggered, the amount reduces to £4,000 per year.