By Hannah English, Head of DC Corporate Consulting at Hymans Robertson
2024: A year of shifts in pensions and finances
This year’s change in the UK government has brought a range of reforms impacting personal finance and pensions. With a renewed focus on wealth redistribution, potential changes to pension tax relief, an expansion of auto-enrolment and a review of the state pension age, 2024 feels like a pivotal year to engage with pension plans and future retirement savings.
At the same time, the ongoing cost-of-living crisis continues to put pressure on households, leaving many people reconsidering their financial priorities. People are cutting back on non-essential spending and even cancelling direct debits for essentials like house and car insurance. For some, pension contributions could be next on the chopping block. This is a worrying trend. By opting out of a pension scheme, individuals risk losing the “free money” from employer contributions and valuable benefits like life insurance.
Addressing the misconceptions around pensions
One of the biggest misconceptions is the belief that pension contributions are somehow “lost” money. There needs to be further education around individual and employer pension contributions, how this is invested to grow over time and the importance of this to ensure long-term affordability. Given the confusion, there’s a strong argument for including clearer communication in payslips that explains deductions. Imagine receiving your first payslip that breaks it down: “This is your income tax, this is your National Insurance, and this is your pension contribution—money that stays yours, invested for your future, alongside contributions from your employer”. This simple explanation could help shift perceptions and encourage more people to take an active interest in their pension.
How we can all make a difference
Pensions Awareness Week 2024 isn’t just an industry event - It’s something we can all engage with on a personal level. There are simple actions we can take to support others and improve understanding of pensions:
Talk to your kids about pensions
If they’re old enough to have a job, they’re old enough to start saving into a pension. Encourage the younger generation to join a pension fund as soon as possible as the earlier they start, the better off they’ll be in the long run.
Help self-employed friends
The self-employed often miss out on workplace pension schemes and employer contributions. Many haven’t even thought about saving for a pension. Talking to them about the benefits of starting a private pension could set them on the right path and make a huge difference to their financial future.
Encourage part-time workers to opt in
If you know someone with two part-time jobs, neither job may pay enough to meet the auto-enrolment earnings threshold. This means they could be missing out on pension contributions from both employers. Remind them that they can opt-in to benefit from these “free money” contributions.
Support those nearing retirement
For friends or family members approaching retirement age, it’s crucial to start planning early. Encourage them to think about what they want from their retirement and research the options available to them, especially in light of potential changes to state pension rules and tax relief reforms.
If we all make an effort, whether that’s through conversations with friends, family, or colleagues, we can spread greater awareness of the importance of pension savings. Supporting Pensions Awareness Week isn’t just about getting people to save more - it’s about demystifying pensions, simplifying the language, and helping people take control of their financial future.
This year presents challenges, but also opportunities to secure a comfortable retirement. Whether it’s navigating the impact of government reforms, finding ways to adjust contributions without opting out, or simply making informed decisions, Pensions Awareness Week is a chance to reflect, learn, and create greater pension awareness for all.
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