By Esmée Hardwick-Slack
Thanks to the introduction of auto enrolment in 2012, more and more people are saving for their future. In 2017, 73% of UK employees were contributing to a workplace pension this is a massive improvement on the 47% in 2012. However, only 25% of self-employed workers are saving into a pension and 1 in 8 Brits will still retire in 2018 with no pension savings at all. Pensions can seem daunting, but there are ways you can ensure you get the most out of yours.
It’s never too late (or early) to save
The most obvious way to ensure you get to most out of your pension is to save as much as you can, which also means starting as early as you can. It’s always a good idea to start saving when you’re in your 40s or 30s (or before!). However, if you’re older there is tax-relief on your pension contributions to ensure it grows.
With pensions there’s no such thing as too early or too late.
Whether you work full time or part time, if you work in the UK, are at least 22 years old and earn more than 10,000 a year, your employer should have enrolled you in a workplace pension. Once this happens you will have the choice on whether to opt out. If you do nothing, you will remain enrolled.
It makes sense to remain in the scheme. Not only are you automatically contributing each month but so is your employer. You will also benefit from tax relief on your contributions.
If you fit the criteria but don’t think you’ve been enrolled, have a word with your employer.
Pay in when you can
Auto-enrolment pension schemes are a great place to start, with the current employee contribution set at 3% minimum (this will increase to 5% in 2019), it should give you a good basic level of income. However, depending on your age and how much you earn, you might want to consider contributing a bit more.
Start off by just paying in what you can afford, then whenever you get a pay rise or a bonus, redirect a portion of it into your pension. Similarly, if you have extra spends at the end of the month, you could pop it into your pension. Small regular payments will help massively, they may not seem like much now but they will add up. Future you will thank you for it!
Work out what you need
It’s important to think about how much money you will need once you retire. What will you expenses be? Will you have any debts? Are there any hobbies you want to take up? Would you like to travel? There are lots of available budgeting tools to help you figure out what your outgoings will be and how far your income will stretch. Check out this list of budgeting apps by Which? or, if you prefer, keeping a spreadsheet will work just as well.
Don’t forget to include any other savings you may have and work out how much of your outgoings will be covered by State Pension, but be aware that this has changed in recent years, so it’s important to stay updated.
If you need help calculating what you’ll have the Money Advice Service has a Pension Calculator to help you find out your likely retirement income.
Once your pension is up and running you will need to check it every now and then to ensure it’s performing as you would expect. Whatever pension scheme you are a part of, you should receive an annual benefit statement. This will show you how your pot is doing and also let you know whether you need to review your investment options, contribute more or even set up an additional pension.
Many of us fail to check our pots regularly, some don’t know how much they have until they come to retire, by which point it’s too late. A survey of 8,529 people by LV= found that 28% don’t know how much they have in their pension pot.
Be sure to keep on top of how much you have to make sure you’re on track.
If you’re confused about any aspect of your pension or want advice on how to plan your future then it’s a good idea to get some help. You could talk to your pension provider or contact the Pensions Advisory Service helpline for free. You can also contact us for Auto enrolment advice or to discuss your personal pension options.
How are you saving for retirement? Let us know in the comments or join the discussion on our Twitter and Facebook pages.
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