While most of us aren’t, everybody should be considering saving for our pension. It’s all too easy to start a pension, and then completely forget about it until it comes to retirement. There are several mistakes you really can’t afford to make, such as not having a pension at all or delaying your pension saving – since the two largest factors that determine how much your pension will be at time of retirement include the amount you put in and the duration you invest for. Don’t think your home is your pension, either. In order to save enough money for your pension, take our top tips into consideration.
Understand what you need
When it comes to saving for your pension, you need to understand what you need. What amount is defined as “enough” to see you through your peaceful retirement? In order to find out, you will need to consider your monthly expenses and bills, how long you will need to be paying these for, and how much is enough to cover the bills and your general living expenses. Pay off any short term loans and other debts that you may have, and try to live within your means.
Double check your National Insurance contributions
We won’t be the first to tell you that your state pension will be very useful to have in retirement – no matter how much money you manage to save elsewhere. However, it is crucial that you don’t take it for granted without finding out if you qualify first. Keep in mind that it’s not the amount of money you pay that counts, but the number of years you have contributed. At this moment in time, you need to have at least 35 years’ worth of contributions (or credits) to be eligible for the full state pension.
Automatic enrolment began 5 years ago in 2012. If you qualify, you will automatically be signed up to your workplace pension scheme. Immediately after that happens, you are given a month’s notice to decide whether you want to opt out of the scheme or not. If you stay quiet, you will remain enrolled, meaning that both you and your employer will begin making contributions to your pension. This way, you will also benefit from tax relief on your contributions, so really you’d be silly to say no!
Save more (if you can!)
The best way to save for your pension is to save more, if humanly possible. If you can put more into your pension, then your definitely should. If you can’t, but receive a bonus or pay-rise, then it’s a great idea to put that extra cash into your retirement savings. However, we realise that it is easier said than done. With the rise of inflation, everyday life can be very expensive. There may be other ways you can increase your income to enable you to stash the cash away, just like there could be several ways that you could reduce your discretionary spending – and break your bad spending habits. Whatever you decide to do, make sure you are comfortable with doing so, and be sure to stay positive it you can simply not afford to save any more than you are now.
Remember: it’s never too early or too late to save
You’ve probably heard of the phrase ‘it’s never too late to start’, and the same rule applies when it comes to saving for your pension. If you’re younger, saving for your pension is much easier to delay, but if you’re older, it’s easy to despair. Either way, it’s never too early, nor too late, to begin. There are benefits for both. While you’re young, you have plenty of years ahead for your investments to grow. And if you’re older? Then you will receive tax-relief on your contributions to ensure it grows, as well as a small percentage of investment growth!
Generic advice is not a service regulated by the Financial Conduct Authority.