While Martin Lewis is typically the finance expert encouraging individuals to bolster their pension savings, he has pointed out that in certain situations, savers could actually be making themselves worse off by contributing.
In a surprising departure from his usual stance on pensions, Martin Lewis delved into how pension savings could impact your long-term retirement.
During a discussion with experts on his Not the Martin Lewis Podcast, the finance whizz outlined some scenarios where he would advise Brits against contributing towards their retirement funds.
He suggested that “it’s just not worth putting money into a pension” if it could potentially cause them to miss out on crucial benefits that could enhance their retirement, such as pension credit which acts as a top-up for pension income.
This benefit is means-tested, meaning those with multiple pension incomes exceeding a certain amount are ineligible.
Martin cautioned: “It could be slightly self-defeating if you’re near retirement and put a small amount into a pension because you’d lose the pension top-up so we wouldn’t have necessarily gained a saving. But that’s an extreme case.”
On his programme, financial guru Martin Lewis was joined by Charlotte Jackson, head of guidance at the Money and Pensions Service, who highlighted: “There are means-tested benefits, (depending on) the way you go into that space particularly if you’re looking at going into a care home.
“Each of them are a balancing act in terms of what you need to pay, what you’re accessing at the moment and the point at which it comes into scope of assessment for means-tested benefits.”
To illustrate Charlotte’s insights, Martin explained: “Someone who’s 45 wanting to save £100 a month, it’s going to be a benefit to them,” but for someone aged 65 saving £10 a month “is going to be questionable”.
Charlotte also shed light on a growing trend regarding pension savings affecting eligibility for benefits, noting: “Pensions are a way of passing on wealth to your dependants. What we’re seeing more of now is people saving, even in later years, and not accessing that pot because it comes with tax relief and you can pass it on.
“If you don’t access that pension pot at any age and you were then to die, that pension pot gets passed to your spouse or children. It can be passed down without inheritance tax.”
