The Institute for Fiscal Studies (IFS) is planning a comprehensive pensions review.

Recent research from the IFS revealed that 60 per cent of middle-earning private sector employees who are contributing to a pension are saving less than 8 per cent of their earnings, and nearly 90 per cent are saving less than the 15 per cent of earnings recommended by Lord Turner’s Pensions Commission.

The IFS said almost all of this saving is coming in the form of “defined contribution” (DC) pensions, leaving individuals, rather than employers, exposed to market and other risks.

The IFS warned that those retiring with DC pots face considerable difficulty and risk in managing their finances through retirement, with risks around running out of private resources or savers being so cautious that they have a needlessly austere retirement.

The report noted that an increasing number of those approaching retirement live in expensive, insecure, private rented accommodation, warning that this could lead a low standard of living in retirement and/or greater reliance on housing benefit.

Summary

• The Institute for Fiscal Studies (IFS) has announced plans for a comprehensive pensions review.
• The multi-year review will examine the effects of changing economic conditions and public policies on the future of financial security in retirement, including how these effects differ by gender, ethnicity and across the UK.
• The review will also consider the impact of changing demographics and longevity trends, as well as the impact on self-employed workers.
• Reports will be shared over the next two years, with concrete recommendations and options for reform to be presented in Summer 2025.
• IFS research revealed that 60% of middle-earning private sector employees who are contributing to a pension are saving less than 8% of their earnings. Additionally, nearly 90% are saving less than the 15% of earnings previously recommended by Lord Turner’s Pensions Commission.
• The review will also consider the risk facing future generations of pensioners and the risk that too many are saving too little for retirement.
• The Pensions Regulator welcomed the plans for the review and will support the development of industry-led solutions to help ensure people have financial security in retirement.

7 ways to retire financially free:

1. Start Saving Early: The earlier you start saving for retirement, the more time your money has to grow. You can use tax-advantaged retirement accounts/plans to maximize your savings potential.
2. Live Below Your Means: Live a modest lifestyle and avoid overspending on unnecessary items. Create a budget and stick to it, and consider downsizing or relocating to a lower cost of living area.
3. Invest Wisely: Invest your money wisely in a diversified portfolio of stocks, bonds, and other assets. Consider consulting with a financial advisor to help you create an investment strategy that aligns with your risk tolerance and goals.
4. Maximize Your Income: Consider ways to increase your income, such as taking on a side job or starting a small business. Maximize your earning potential by developing new skills, pursuing advanced education, or seeking a higher-paying job.
5. Pay Off Debt: Avoid carrying high-interest debt, such as credit card debt, into retirement. Pay off your debts as soon as possible to reduce your financial obligations and free up money for savings.
6. Plan for Healthcare Costs: Healthcare costs can be a significant expense in retirement. Consider purchasing long-term care insurance or a supplemental health insurance policy to help cover these costs.
7. Have a retirement plan: Develop a retirement plan that takes into account your goals, income, and savings. Monitor plans regularly and make adjustments to ensure that you stay on track.

Millions of people have lost faith in the complex and muddled pensions system, preferring to do their own thing by investing in things like buy-to-let property, business or trading directly on the stock market.

Whilst this can work for some, ignoring the many benefits of pension investing, such as tax relief, carries risk.

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Retirement is a phase of life that everyone looks forward to. It is a time where one can finally relax and enjoy the fruits of their labor. However, a recent report by the Institute for Fiscal Studies (IFS) has highlighted a concerning reality regarding retirement planning in the UK. According to the report, a staggering 90% of UK workers are underfunding their pension, putting their financial freedom in retirement at risk. In this article, we will explore 7 ways to retire financially free, ensuring a comfortable and stress-free retirement.

1. Start Saving Early: It is never too early to start saving for retirement. The sooner you begin, the more time your money will have to grow. Take advantage of pension schemes offered by your employer or consider setting up a private pension plan.

2. Increase Pension Contributions: If you are currently contributing the minimum amount to your pension, it is time to reevaluate. Aim to contribute as much as you can comfortably afford. Increasing your pension contributions can significantly boost your retirement fund in the long run.

3. Diversify Investments: Don’t solely rely on your pension for retirement income. Consider diversifying your investments by including a mix of stocks, bonds, and other assets. This will spread the risk and potentially provide higher returns.

4. Seek Professional Advice: If you are unsure about the best retirement savings strategies or investment options, seek advice from financial professionals. They can help you navigate the complex world of retirement planning and tailor a plan that suits your specific needs and goals.

5. Reduce Debt: Clearing existing debt before retirement is crucial. A significant portion of your retirement income may be eaten up by debt repayments, hindering your financial freedom. Prioritize paying off high-interest debts to alleviate financial stress in retirement.

6. Consider Downsizing: As retirement approaches, consider downsizing your property to release equity. This can provide a lump sum to boost your retirement fund or to cover any unexpected expenses. In addition, downsizing can also lower your living costs, allowing you to stretch your retirement savings further.

7. Continuously Review and Adjust: Retirement planning should not be a set-it-and-forget-it process. Regularly review your pension contributions, investment performance, and life circumstances to ensure your retirement plans remain on track. Adjust your strategy accordingly to address any changing financial or personal situations.

The IFS report serves as a stark reminder of the importance of taking ownership of retirement planning. If the majority of UK workers are underfunding their pensions, it is clear that there is a need for increased awareness and action. By implementing the strategies mentioned above, individuals can significantly improve their chances of retiring financially free and enjoying their golden years stress-free. Remember, time is of the essence, so start planning for your retirement today!