Middle Earners Uncertain Over Pension Savings

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£50,000 is the magic number for workers as when their earnings hit that level they have to think more seriously about their pensions.

More than half of workers earning £50,000 a year have spoken to a financial adviser about pensions and investments – compared with just over a fifth earning between £40,000 and £50,000, according to a new survey.

And two-thirds of top earners are worried that their pension savings will breach the lifetime allowance of £1 million, leaving them open to hefty fines from HM revenue and Customs (HMRC).

The figures reflect an underlying panic about pension savings brought about by the government systematically reducing the lifetime allowance from £1.5 million a few years ago.

Moving pension goal posts

Workers planned their retirement saving strategy at around those targets, only for the goalposts to keep moving over recent years as Chancellor George Osborne has regularly tinkered with pension rules.

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The figures come from financial firm Octopus Investments, which claims the government is creating a two-tier retirement planning system with earning £50,000 a year the tipping point between the two levels.

Simon Rogerson, CEO of Octopus Investments, said: “People would invest their money differently for retirement if they had known in advance what changes the government was likely to make.

“Now, there is a marked shift in behaviour of earners with incomes of more than £50,000 a year who are genuinely worried that they will face surcharges from HMRC because their retirement savings will breach the lifetime allowance and there is little they feel they can do about it.

Unfairly treated

“Many of these people are middle income earners who lack the money and expertise to pay for or make complicated financial decisions and feel unfairly treated by the government.”

Rogerson explained that the study revealed one in four of high earners felt less confident about having enough money saved to pay for a comfortable retirement.

“The danger of a two tier system is earners with a little more money can afford advice that will make them slightly better off, but others who cannot afford the fees will possibly make the wrong decisions and end up with less money than they could have in t=retirement.” He said.

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