Update pension contributions to combat inflation, farmers told

Farmers and self-employed people working in agriculture are being urged to update their pension contributions following two years of high inflation.

Many farmers use pensions as an alternative income stream in later life to reduce the impact of multiple generations taking income from the farm – and the number doing so is steadily growing.

NFU Mutual research shows 77% of farmers now have pensions, up from 66% four years ago. But inflation is eroding the buying power of money – prompting advice for farmers to reassess their contributions.

Farmers and the self-employed often don’t increase their pension contributions, leaving them vulnerable to a shortfall in later life. But with inflation predicted to continue falling this year, a small increase can have a positive long-term impact.

The Bank of England’s inflation calculator suggests goods and services costing £100 five years ago would cost nearly £125 today.

NFU Mutual pension expert Martin Ansell said: “It’s crucial that farmers review their contributions during inflationary periods.

“Employees who sacrifice a percentage of their pay into a pension will automatically have their pension contributions increased with pay rises. But farmers and the self-employed need to change their contributions manually by telling their pension provider or financial adviser.

Positive step

“If you have always put a certain amount into a pension, consider increasing it by a small percentage in order to help combat the impact of inflation. It can be a positive step over the long-term, and outweigh the temporary effects of high inflation.”

Research from NFU Mutual shows that farmers are more likely to put money into a pension on an ad hoc basis, rather than with regular monthly contributions, with 72% of farmers saying they invest ad hoc.

Mr Ansell said: “Farm profits can be cyclical and sometimes irregular. Our research shows that farmers are more likely than others to make ad hoc payments into their pensions when it suits them instead of monthly.”

He added: “While we know this approach will work for the finances of many farms, it’s important those ad hoc payments aren’t forgotten about or farmers could risk a financial shortfall in later life.”