Three bits of news that might affect your wealth

There has been a flurry of information this week about spending, saving and managing your money.  

In a double whammy, one government review highlighted that many Brits are not saving enough into their private pensions, and a second review revealed the rising cost of the state pension.

We had the news that certain people might have to wait until much later in life to receive the state pension. There were also further signs that we might be forced to pay higher taxes soon.

Anyone still in work might think this isn’t something they need to worry about today. Think again. Having a financial plan now can yield big benefits down the line so it can pay to stay abreast of money-related rules and potential changes to them.  

Let’s now go through the key events and why they matter to a large chunk of the UK population.

The UK isn’t saving enough

A government review found 45% of working-age adults are saving nothing into their personal pensions, and in general, retirees in 2050 are on track to have 8% less income than those retiring today.

Low numbers of savers are particularly prevalent in women, low-earners, self-employed people, and some ethnic minorities.  

This is not a new problem for the UK. The introduction of automatic enrolment, which means full-time workers are automatically opted into a pension scheme and employers are required to contribute, saw a large increase of pension savers.

But many people are contributing just at the basic level and might find they don’t have enough money to live their desired lifestyle in retirement.

This has led to speculation that the minimum percentage of a salary paid into a pension via auto-enrolment will be lifted, although the government has promised that will not happen during this parliament.

The findings of this report present a good opportunity to reflect on your own pension contributions. Even if you’re still young, the more you save now, the more time that money can grow and ensure you have enough income for your future.

Could the state pension age increase to 68 sooner?  

A review of the state pension revealed that the scheme is costing the UK government more than it anticipated. The state pension could cost nearly 8% of the UK’s GDP in the next 50 years. Currently, it costs about 5.2%.

This is partly due to the current ‘triple lock’ policy that is in place for state pensions. The policy means that each year, the state pension will go up by the highest of inflation, average wage increase, or 2.5%. In the past few years, this has meant some significant increases, including a 10.1% rise in 2023.  

Currently, Brits start receiving the state pension at 66, which means they will get up to £230.25 per week to help supplement their retirement income. The starting age is set to increase to 67 between 2026 and 2028 and was already in the plans to increase to 68 tentatively in 2046. But it’s looking likely that this increase will be moved up much sooner. The other possible solution to the money shortage would be to change the triple lock policy.  

Whatever the changes, they usually happen in a way that gives people time to adjust their retirement plans. But staying aware of the possible changes and ensuring your personal pension is prepared for an extra few years before help from the state could be vital.

Even though the state pension is a good starting point, it does not fully fund the lifestyle that many people would like in retirement, which means most people grow private pensions and personal savings as well. And especially if the state pension age is moved up, you may need to fund a chunk of your retirement without any government help.

Do UK borrowing rates mean more taxes on the horizon?  

In June, the UK borrowing rose by more than expected to £20.7 billion. The jump has been attributed to rising costs of public sector spending, and increased interest rate payments on debt.  

This could act as further fuel for tax increases in the autumn Budget to help cover the costs. It’s not clear yet where those tax increases will come from, but it could mean a slight pinch on many people's pockets in the future. Having a strong grasp of your monthly budget could help to prepare for any tax increases.