Investing markets potted synopsis
- Consumer inflation eased to 3.3%, led by lower energy costs
- Bank of England cut the base rate from 4.5% to 4.25%
- European stock indices saw a lift after President Trump delayed 50% tariffs on EU goods until July
39% at risk of poverty in retirement
A new study released this month shows the UK isn’t saving enough for retirement. Findings include:
- 39% are not on track to having enough income to meet their basic needs at retirement
- 15% don’t think they’ll ever be able to retire
- 60% of low to middle income earners, especially those in their 30s, are projected to see their income drop by more than 60% when they retire
The Pensions and Lifetime Savings Association say that to cover your basic needs at retirement, a single person should aim for an annual income of £13,400 and a couple should aim for £21,600.
Currently, under the auto-enrolment scheme, an employee must save a minimum of 8% of their annual salary into a workplace pension. That includes a minimum of 3% contribution from their employer, as well as a contribution from the government in the form of tax relief. However, some in the industry are calling for the minimum contribution to be raised to help better prepare Britons for retirement.
Do you know how much you’re contributing to your workplace pension? It’s important to review your pension progress regularly – you can do it easily using the Moneybox Pension Calculator. Enter a few details including your current savings, salary, and target retirement income to see what you’re on track to earn.
If you can afford to, it’s a good idea to increase your contributions as you earn more throughout your career.
Projections are not a guarantee of future performance. You may get back less than you invest.
Pension megafunds
In May, Rachel Reeves, the Shadow Chancellor, put forward proposals to reform the UK’s pension system. This includes the creation of pension ‘megafunds’, defined as pension schemes which manage at least £25 billion in assetsAn asset is anything that holds value and which can be bought and sold freely..
This follows suit of countries like Australia and Canada, which have already taken similar steps and say that it’s allowed pension fundsFunds, also called ‘tracker funds’, are financial instruments that have been set up to match or ‘track’ the price of a market index. Investing in a fund lets you get exposure to different financial assets like shares and bonds, without having to buy them directly. to invest in bigger infrastructure projects and private businesses.
The chancellor says, “These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses — the Plan for Change in action.”
While others in the industry worry that the change could open the door to allow the government to ‘mandate’ how pension schemes invest money.
Should I do anything?
While this won’t have a huge impact on your day-to-day, now is a good time to take a look at your workplace and personal pensions. What are you actually invested in? Do your investments align with your goals and values? If not, take a look for more appropriate investments.
Moneybox does not offer personal financial advice or make specific recommendations based on your individual circumstances. If needed, seek independent financial advice before making decisions regarding your financial goals.