Should you worry about paying more money into your pension?
I realise this sounds both controversial and the opposite of our usual encouragement to boost your pension saving, but bear with me.
While our politicians indulge in some more pointless point-scoring arguments over the state pension, it’s worth thinking about how that, our work and personal pensions, and other savings or investments fit together.
Because if the goalposts get moved on when you can access your pension, this could have a more substantial effect than the state pension on how we aspire to enjoy our retirement.
Moving the goalposts: You can currently get at a pension at 55, but that’s due to rise to 57 and could keep going up with the state pension age
I’m 45, so my state pension age is currently officially set at 68.
Ideally, I’d like to retire before then – or at least have the option to. My dad died a decade ago, aged just 66, a couple of years after he retired. That focussed my mind on hopefully being able to stop working before my official retirement age.
My plan has always been for my work pension savings to do the heavy lifting on that. I’ve got two small Sipp pots, but most of my retirement investments are in my defined contribution work scheme.
Saving into your work pension is a smart move: it gets you tax relief and contributions from your employer – and the earlier you do it, the richer you will eventually be. Read our guide to how pensions work.
But while savers can currently access their work or personal pension from the age of 55, I’ll probably have to wait until I am 58.
This is thanks to rules that restrict when you can access your pension linking it to a decade before the state pension age.
The risk for people like me in their mid-40s, or those who are younger, is we are far enough away from state pension age to end up in pensions double jeopardy, if a future government decides to ramp it up to balance the books.
I’d like to think the threat of a major backlash would mean politicians wouldn’t suddenly whack up both the state pension age and when we can access our pension savings, but it could happen.
The knock-on effect of a big rise would be to drastically reduce people’s options when it comes to retiring early or stepping back from full-time work.
None of the main political parties seem keen to discuss or plan for the state pension funding issues the UK faces, which only serves to heighten the risk.
For example, the triple lock has improved the state pension for those being paid it now but increased the chance that those of us who are working and paying for those pensions will have to work longer.
At the extreme end that leads to a question I often get asked by people in their 20s, 30s and 40s: will we even get a state pension?
My answer is usually that I can’t see the state pension for all being axed, as this would represent a fundamental breakdown of Britain’s economic contract. But it’s not impossible.
A measure of the interest here is that our recent Steve Webb column on whether the state pension could ever be means-tested was This is Money’s third most read article last month, with more than 500,000 views.
A good financial mantra is not to plan to rely on your state pension alone.
The answer is usually to start paying into a work pension – or a Sipp if you are self-employed – as early as possible and make the most of the tax relief benefits on offer.
I would certainly always suggest it’s wise to max out the contributions you can get from your employer, by paying as much in as it takes to get them.
Above that, I think the case for paying more into your pension isn’t always clear.
I target most of my extra investments into my stocks and shares Isa. This is what I expect I will rely on to supplement my income if I can ease back on work in my late 50s.
The problem is that an Isa requires more discipline because you can tap into it at any time.
I always say the great disadvantage of a pension is that you can’t get at the money – and the great advantage of a pension is that you can’t get at the money.
It would substantially improve the nation’s financial planning and confidence if we could get a similarly lengthy commitment to what the pension rules we face will be.
