It’s not always good to have a pension – small is not beautiful

In my last post I mentioned that investing in a pension might not be the best solution for someone on a low income.

Consider that, according to the Association of British Insurers, the average pension pot at retirement is £36,800. In the annuity market this would probably generate an income of approximately £40 per week. Using the government’s Pension Service Pension Credit Calculator an individual in receipt of the basic statement pension of £113.10 per week would be entitled to pension credit of over £38 a week.

However, had they saved hard to achieve the average pension pot size of £36,800, the £40 extra income would see their entitlement to pension credit drop to barely £16 pounds per week. Thus their £40 pension would mean that they lost more than £22 a week in pension credit.

Faced with such a calculation, it would be far more effective for them to pay down debt and anticipate unavoidable expenses than to save for a pension.

Take care out there

PensionMan

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