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Pensions plummet as the credit crunch bites
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Billions of pounds have been wiped off the value of UK pension schemes in recent months as the effects of the credit crunch hit funds. Find out how you can prepare now to live in luxury later in life
According to research by stockbroker Brewin Dolphin, has found that more and more consumers are cutting back on pension contributions to meet the soaring cost of living.
Meanwhile other research, this time by Morgan Stanley, shows falls in the FTSE100 share index since the start of the year have increased Britain's collective company pensions deficit by more than 150%.
This is because many people's company pensions are largely dependent on the stock markets which have had a rough ride over the past few months.
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The fallout from the credit crunch – which has brought higher mortgage costs and the end of easy credit – coupled with a depressed housing market and higher fuel prices are putting increasing pressure on households' purse strings.
Brewin Dolphin’s survey shows that a tenth of people saving for their retirement – almost 2.4 million Britons – say they’ll have to stop or reduce contributions in the next 12 months due to the worsening economic outlook.
Those aged 25 to 34, female and living in London are the most likely to take pension payment breaks.
But even a short payment break could have a serious impact on an individual’s income in retirement.
For example, a 32-year-old man aiming to retire at 58 and saving £400 per month into his pension fund could expect to have a total pension pot of £791,760 in 2034.
A payment break of a year would save him £4,800 in contributions, but could cut the final pension pot to £756,201 – £35,559 less.
by Emma Lunn, 12 May 2008
