Pension provider Hargreaves Lansdown has called for more clarity after Prime Minister Andy Burnham announced a major change to the state pension triple lock. The institution has urged policymakers to provide more details about its tax policies going forward.
Triple lock adjustment announced
Andy Burnham announced in his speech at the Labour Party conference that the triple lock would be adjusted from 2030, with the average earnings metric to be removed. The current policy ensures state pension payments rise in line with whichever is highest of either inflation, the rise in average earnings or 2.5 per cent.
The Government said that under the new rules, it will still make sure it keeps up with average wage growth over time. But Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said ministers need to provide more details for the public.
Advice for savers
Morrissey urged people to save into their private pensions, regardless of what changes are on the way to the state pension. She said: "Whether there's a triple or a double lock, the best thing people can do to ensure they have enough money to fund their retirement is to start paying into a workplace or private pension early."
She added: "Now that the move from the triple lock to the double lock has been announced, the Government must also provide savers with a stable tax environment and publish a five-year tax roadmap that sets out its plans on the important issues that influence how people plan for retirement, such as tax-free cash and pensions tax relief."
Tax relief and pension access
People paying into their pension get a 20 per cent basic tax relief on their contributions. If you are a higher earner, you can claim the extra 20 per cent or 25 per cent on top of this.
When it comes to accessing your pensions, you can withdraw up to 25 per cent of the value of each of your pots tax-free. You can withdraw up to a total of £268,275 across all your pension pots in this way.
You can currently access your pensions from age 55. The access age is increasing to 57 from April 2028. This is also the point when the state pension age will complete its transition to 67. The state pension age is gradually increasing from 66 to 67, in one-month increments between April 2026 and April 2028.
Impact of saving early
Figures from Hargreaves Lansdown show how starting to save into your pension sooner rather than later can make a huge difference to your retirement income. If you pay £200 in a month into your pension from the age of 32, assuming a 3 per cent yearly increase to your contributions and a 5 per cent growth in the pot, you would have a pot worth £363,000 when you reached 68. If you started this 10 years earlier at age 22, you would have £700,000 saved up, a difference of £337,000.
