Many believe the state pension system should be reformed, so there are few or no means-testing penalties and the kind of provision people can expect to receive in retirement should be made clearer.
"People aren't incentivised to save, because those with income below a certain threshold qualify for full state benefits, while those who exceed the limit see their benefits reduced or even removed," says Alasdair Buchanan, head of communications at pension provider Scottish Life.
"The problem is that income from private pension savings is taken into account when calculating some of these benefits. As a result, an individual who responsibly decides to save then loses some means-tested benefits and could end up with the same overall income as someone who hasn't saved at all." This isn’t fair.
Government plans to introduce a flat-rate pension for everyone, of around £140 a week by 2016 should address the issue, he says. This would not only be fairer for those who have saved responsibly through IFA’s but it might also encourage young people to save more if they knew how much state pension they would get.
Research for the National Association of Pension Funds (NAPF) found half of those aged 18 to 34 would boost their saving if they understood what they would receive from the state on retirement. NAPF said the state pension should be simplified from its current state as one of the most complicated in Europe.
IFA’s in Bishop Stortford agree and can help young and old plan for their retirement alongside current reviews of the state pension.
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