Official figures suggest that the recession has seen the average household’s retirement savings reduced by over £10,000. The Office for National Statistics puts the figure at a staggering £400 billion drop in the UK population’s combined pensions in a single year. It’s not just down to personal hardships affecting savings either; for the first time in a long time, companies have cut the amount they pay into workers’ pension schemes.
These figures give us our first real insight into the effect that the recession will have on people’s retirement. The huge drop in the value of people’s pensions will have the knock on effect of postponing their retirement until they feel they can afford it. After all, there is no guarantee that you’ll have paid off your mortgage by the time you hit retirement age. There is also the chance that unexpected expenses can put extra pressure on your financial situation. It all points to the added importance of your savings and clearing yourself of your debt burden by the time you leave employment. The sad truth is that, due to a couple of significant drops in the price of shares, the value of the average pension has hardly increased at all in the last ten years. This trend looks set to continue for another ten years, as the UK economy struggles to recover from the recession.
In 2008, the average amount being saved was less than 2% of a person’s earnings. That’s the lowest proportion put towards savings since the 1950s. The Office of National Statistics put the UK’s total pension fund in 2007 at £2.2 trillion, this fell to £1.8 trillion in 2008 after the fall in the stock market. At the same time, employers’ pension contributions fell by almost £6 billion. Essentially, if you earn £50,000 a year, you’ll have £250 less going into your pension. That’s £250 that would otherwise be going towards the savings that keep you afloat in your retirement. That’s £250 that would be going to pay off your debts when your salary is no longer there to rely on. You should act on this now and free yourself from the burden of bad debt before your retirement. There are debt solutions on the market that can help you achieve this so visit dev.harringtonbrooks.co.uk and use the free, no obligation debt wizard to find your best option.