Is it worth paying into a pension anymore?

badatdeciding

With the cost of living rises, I am wondering if it is worth reducing or stopping my pension contributions. If retirement ages are likely to rise to 71, if pensions are to be taxed more, and I have genetic risk factors for dementia and cancer that could mean I may be dead before I am 80, should I just use the money now to make life easier?

Dazed_and_C0nfused

badatdeciding said:

With the cost of living rises, I am wondering if it is worth reducing or stopping my pension contributions. If retirement ages are likely to rise to 71, if pensions are to be taxed more, and I have genetic risk factors for dementia and cancer that could mean I may be dead before I am 80, should I just use the money now to make life easier?

Highly unlikely to be the right thing to do, particularly if you are in a DB scheme.

I presume you know the latest inflation figures are now sub 2%?

cfw1994

Well, the tax uplift remains for now: certainly if you are a 40% taxpayer who might draw down at 20% (warning: current figures, may change!), it makes sense to continue: instant 20% uplift 💪
Also: it is ALWAYS worth paying in enough to get any company-matched additions.  For example, if they will add up to 8% for any you put in, it is a no-brainier to make sure you put in at least 8% 👍

Of course, if you have expectations of illness, then a whole raft of tricky questions come into play.  

The future is uncertain.  

Are there things you can do to improve your health/chances?

I believe there are rules around accessing a pension if you have a terminal illness: example here.

All that said, I am also a believer that you should do your utmost to life your best life now!  Maybe hedge your bets: continue to pay some in, but use some of the other for holiday/excursion/[insert you idea of a treat here] in the coming year 🤷‍♂️

Marcon

badatdeciding said:

With the cost of living rises, I am wondering if it is worth reducing or stopping my pension contributions. If retirement ages are likely to rise to 71, if pensions are to be taxed more, and I have genetic risk factors for dementia and cancer that could mean I may be dead before I am 80, should I just use the money now to make life easier?

How old are you now? Are you employed and if so what sort of pension scheme does your employer offer?

p00hsticks

badatdeciding said:

With the cost of living rises, I am wondering if it is worth reducing or stopping my pension contributions. If retirement ages are likely to rise to 71, if pensions are to be taxed more, and I have genetic risk factors for dementia and cancer that could mean I may be dead before I am 80, should I just use the money now to make life easier?

You don't say how old (young) you are, but I think it unlikely that you will see a State Pension Age of 71 - the current plan is to increase to 68 by 2044, and although reviewed every ten years I think that the life expectancy increases which drive rises are currently slowing.  

Unless your genetic factors are for early onset dementia then you may well find that you wouldn't develop it until well after you'd want to retire. 

And if you genuinely have a identified genetic condition that predisposes you to certain types of cancer, such as BRCA1 or 2, then presumably you are getting more frequent monitoring that normal so that any signs may be identified early. Many cancers are extremely treatable when detected earlier and research is improving all the time - cancer is by no means the death sentence it once was (and many people mistakenly still think it is). 

So without more information on the above or how much you are struggling financially now , my personal view is that none of your reasons are sufficient to warrant stopping paying, especially if by doing so you would be sacrificing employer contributions and so effectively taking a pay cut. Bear in mind that, depending on how your pension is taken, you will not be paying tax or NI on your pension contributions, and so will not get the full amount in you pay packet if you stop. 

Baldytyke88

badatdeciding said:

With the cost of living rises, I am wondering if it is worth reducing or stopping my pension contributions. If retirement ages are likely to rise to 71, if pensions are to be taxed more, and I have genetic risk factors for dementia and cancer that could mean I may be dead before I am 80, should I just use the money now to make life easier?

The Government will always encourage pension saving, unless you are obese - on average you will live beyond 80, on average.

My life expectancy is 85, but as I am reasonably healthy, that could be higher.

https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

MX5huggy

The rise and the potential rise in pension age is exactly why I’m saving in a pension I want to retire as soon as possible. 

Mutton_Geoff

I think people often overthink pensions. All they are is a savings scheme for retirement.

Employers contribute and this should be thought of as deferred salary and for personal contributions, if you can afford it, why not save whilst you're earning for the period when you're not.

IMO the planned IHT on SIPPs isn't a big issue, the tax wrapper for pension saving was to encourage savers to provide for themselves in later life, not to provide a shelter for inheritance beneficiaries.

Whatever vehicle you use, it always makes sense to have savings to spend on holidays, cars and living costs in later life.

LHW99

State Pension age is not (necessarily) the age you retire.

Paying into a pension means you may be able to retire earlier as you would have money to support you between when you do want / need to retire, and when you get state pension.

As long as you can support yourself, no-one (even the Government) should have any problem with you retiring whenever.

dunstonh

If retirement ages are likely to rise to 71

Where are you getting 71 from?
The average retirement age in the UK has risen from 62 to 65 in recent years.   Nothing hints of it getting to 71.  You would always expect it to be less than state pension age by several years.

 if pensions are to be taxed more, and I have genetic risk factors for dementia and cancer that could mean I may be dead before I am 80, should I just use the money now to make life easier?

Pensions are taxed under income tax and there is less tax on them now than there was in 1988.

Pensions are just an account with money in.    If you think you can get to 80 without any money then go for it.  If you need to put aside money from when you retire then the pension is the most tax efficient way to do it 90% of the time.

If you are employed, then the free money from the employer is a no brainer.  

elsien

My state pension age is 67. With my company pensions etc I am aiming to retire at 63. 

I would do it earlier if I could, but I left my pension planning a little late. 

State retirement age isn’t always the most relevant factor.