Personal finance expert Gemma Godfrey has been answering your questions on the cost of living and money saving dilemmas: Could your pension contribution be put to better use for things like paying your bills?

Mark A: Hello, I’m 37 years young and started a pension late. I had approximately £35,000 in there. With the world as it is, this has now dropped to £24,000. What on earth should I do? With the cost of living the extra money would be handy, rather than going in a pot which is disappearing.

Gemma says: This is such a tough question because for some people, paying into a pension is no longer an option as they’re struggling to cover their current basic costs to live.

However, your question implies that you could continue to pay, you’re just wondering if you should.

The most important thing to say is that when making any financial decisions, it’s important to speak to a financial professional who can review your particular situation and offer personal advice.

The following is in no way a personal recommendation.

First of all, pensions offer some serious financial benefits, such as being able to contribute with a gross salary (without tax being charged), an employer can add their own contribution, and the pension pot can eventually be drawn down tax-free as well.

Secondly, a pension offers the chance to beat inflation because it can invest in the shares of companies that may be profiting from rising prices.

Investments fall in value as well as go up, and that’s why having a long-term time horizon is so important to be able to try and weather the storms.

In general, we’re living longer and the cost of care in later life is getting more costly, with only a pension to fund it once we’ve stopped working.

Also, while we tend to think of a pension as something we don’t need until later in life, it’s the early years that are the most important to fund it.

For an average earner in their thirties, missing even just a couple of years of contributions could cost tens of thousands of pounds at retirement.

Gemma is a business adviser, finance expert and TV host, an ambassador for the charity Surviving Economic Abuse, and a former boardroom adviser to Arnold Schwarzenegger on The Apprentice.

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