Money Expert Says Simple Mistake Could Lose Workers £10,000 From Their Pension
A money expert has warned that workers could lose tens of thousands of pounds of their pension by simply having the wrong retirement date.
Martin Lewis, the found of MoneySavingExpert.com, told viewers of Good Morning Britain that workers who are saving into a workplace or private pension could be missing out on thousands if their scheme has set their date of retirement too early or too late.
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When starting a new job, employers typically set the default retirement age for employees when they set up their workplace pension.
However, recent changes in the state pension age means anyone under the age of 41 will not receive their pension until they are 68. Previously, women would receive their state pension at age 60 and men at 65.
There has also been a removal of the default retirement age meaning people can work for as long as they want or need.
Therefore, if someone is planning to retire later and fails to notify their pension provider there can be serious consequences for their retirement income.
When workers approach their retirement date, their investments are switched from higher risk (higher return) funds, to lower risk (lower return) funds, to protect their pension savings from sudden moves in the market.
"If your retirement age is set wrong then you move into low risk funds too early - 15 years from the point of your retirement," Martin explained to GMB viewers.
This means workers will lose out on savings when their pot is working at its hardest.
"Millions of people could be affected and potentially could lose out on thousands of pounds because they simply have the wrong date," says Martin.
Employers typically set the default retirement age for all their employees when they first set up their workplace pension. Members can then contact their provider and set their own retirement date.
Research from Aviva found that people could be missing out on more than £4,000 in their pension pot if they stick with the retirement age of 65 and they intend to retire at 68.
Anyone with their retirement age still stuck at 60 could miss out on nearly £10,000.
"Go to your scheme and check what your retirement age is, and if it's wrong, put it right," is Martin's advice.
This is also expected to affect women more due to the way default retirement ages were set in the past.
It's a no brainer really.
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