Pension ‘changes’ are coming in 2021 – how Britons can best navigate and grow their pot

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Pension saving can be a difficult endeavour, particularly for those who are currently feeling a financial pinch, and circumstances are likely to have changed in recent months. Many will have had their usual working lives uprooted through furlough, and self-employed people may be in receipt of government grants. Those who have lost their jobs may have stopped saving towards retirement altogether, and some may have paused contributions.

Whatever the personal circumstance someone faces with their pension, though, there is action which can be taken, even in the face of uncertainty this coming year. spoke to Pete Glancy, Head  of Policy at Scottish Widows, who reflected on 2020, and provided insight into saving in the new year.

He said: “Taking a look back, it’s difficult to fully gauge the impact that the pandemic has had.

“COVID-19 has transformed many aspects of our lives and created substantial personal and financial challenges for millions.

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“As many focus on short-term survival, long-term savings have taken a hit. One in five people now expect to retire after 70 or keep on working indefinitely as they simply won’t have enough savings to retire.

“Having a job is one of the biggest determining factors for ensuring an adequate retirement.

“The level of your salary and the generosity of employer pension contributions add to this, but ultimately your job has a huge impact on your ability to save into your pension.

“2020 has seen millions of workers furloughed with a 20 percent reduction in earnings, so it wasn’t surprising to see that pension contributions also fell by a fifth.”

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Mass furloughing and unemployment has unfortunately been a symptom of the ongoing pandemic, impacting millions of people.

But as this shifts towards a rise in unstable ‘gig’ employment, Mr Glancy stated he believes this will continue into 2021 as the economy struggles to rebuild. 

However, this could spell bad news for pension saving, with employer contributions missed out on, and less generous pension schemes overall.

In drastic circumstances, some may even miss out due to a failure to meet the minimum earning threshold of £10,000 to receive auto-enrolment. 

Mr Glancy continued: “Despite this, auto-enrolment is a pensions success story, and is here to stay in 2021.

“The swift intervention we’ve seen from the government to cover employer pension contributions through the furlough scheme sent a clear message: auto-enrolment will not be diminished.”

But Mr Glancy also stated 2021 is likely to bring about significant changes from a legislative and regulatory perspective.

This year, there will be work on making sure Britons do not fall victim to pension scams, providing advice at a reduced cost, and helping people to consolidate their pots.

In addition, working towards helping people to grow their pension will be a primary goal. 

He added: “2021 may not be the year this change is implemented, but as we look to recovery it will be the year that roadmaps and pathways are set out.

“Progress needs to be focused on progressing the likes of the Pensions Dashboard, which will allow savers to see all their lifetime pension savings in one place, seeking new ways to make financial advice affordable and developing simpler and more consistent annual pension statements.

“I believe that 2021 will be an exciting year, as we see pensions being linked to the bigger picture, looking at the role they play in taxation, wellbeing and other forms of savings.”

For those who have experienced changes to their pension, it is important not to panic.

It may be the case that a new attitude towards pension saving needs to be adopted, for example saving little and often rather than putting large sums of money away.

However, people should still be considering their plans for retirement and how to track towards their future. 

This will differ according to where a person is on their retirement journey, how far out they are from leaving the workforce, and their ultimate goal.

As a result, some may benefit from taking further advice on the matter before making a decision.

This may involve consulting a pension adviser, or alternatively using websites such as the Money Advice Service or Pension Wise to provide further clarity. 

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