Funding retirement is Brits' top financial worry

Funding retirement was the top financial worry for UK employees for the second successive year, according to research from Close Brothers.

The research, titled Changing Trends of Financial Wellbeing, said more than a third (34%) of UK employees named funding retirement as their top money worry.

It also found that only around half (52 per cent) of those aged 55-64 were aware that there is an annual limit on the amount that can be paid back into a pension before a tax charge is applied.

Close Brothers' study comes on the same day that it was revealed that the number of individuals taking flexible pension payments increased by 6 per cent in the third quarter of 2020, compared to the same period the year before.

Close Brothers head of financial education, Jeanette Makings, said: “When it comes to deciding whether to drawdown a pension, there are positives in terms of having the flexibility to take out what’s needed at times to meet specific goals.

“But there are also risks; not least where the pension is invested and monitoring it in line with changing needs over time; being careful to not draw too much or too little and the impact of both on lifestyle in retirement, especially in uncertain economic times. Of course, understanding the tax implications is also key.”

The vast majority (87 per cent) of employees thought saving into a pension was important, with 70 per cent of respondents identifying it as the best saving method for retirement.

Makings said it was “vitally important” that people understood their choices and the implications of their actions and added that “the retirement landscape and individual financial health is more uncertain than ever due the ongoing pandemic”.

She continued: “It is concerning that more than a quarter of pension savers (27 per cent) think auto-enrolment takes away the worry of saving for retirement. Given that only half are aware of the annual limit and tax charge for any further pension savings; there may be tax bills on the horizon for some.”

She concluded: “Employers have a key role to play in supporting employees to understand and make good pension choices throughout their career.

“Employers have to provide a workplace pension, so the addition of education and continued pension engagement to help employees understand and make the most of this valuable benefit will reduce employee money worries, increase financial security, and enhance their employee value proposition.”

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