Young people impacted by pension holidays
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Young people impacted by pension holidays
Taking a break from pension contributions has been shown to have more of an effect at younger ages than for those who are closer to retirement because savings made earlier in life benefit from a longer time in which to grow.
Research shows that if a 25-year-old, on an average salary, took a three-year break from pension contributions, they would miss out by £800 a year in retirement (assuming retirement at age 65) equating to around 10% of their monthly private pension income. Under the same circumstances, a 55-year-old would only lose around £400 a year on retiring at age 65.
Young women are more likely to take a pension holiday, with figures showing that 10.5% of women aged 22-29 have opted out of their workplace pension, compared to 8.1% of men in the same age group*. Women in their 20’s and 30’s are more likely to be faced with challenges such as starting a family, working part-time, or managing the cost of childcare, all of which can make retirement planning seem less of a priority.
*Royal London, 2019
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.
Information is based on our understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
Tax treatment is based on individual circumstances and may be subject to change in the future.
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