If you can manage to keep paying into your pension pot during this challenging period, you’ll enjoy the benefits when you retire.
For many people, saving for a pension can be difficult at the best of times. Now COVID-19 has made financial planning harder than ever before.
With so many people worried about their jobs and livelihoods, it’s understandable if pensions slip a long way down the list of priorities.
If you can keep paying into your pension through this difficult period, even if it is a slightly reduced contribution, then you’ll enjoy the rewards when you come to retire.
Yet while household budgets may be under strain, it’s crucial to remember that you are playing the long game. If you are not approaching retirement then you are hopefully building a nest egg for a time when the current disruption will have passed.
While this goes for everyone of course, women in particular need to think about the impact a pause in their savings will have on their retirement plans.
Research by NOW:Pensions and the Pensions Policy Institute shows that by their 60s, women typically have £51,100 in their pensions, just one-third of an average man’s £156,500 pot. That is over £100,000 less!
This is because women are likely to earn less throughout their careers and have different working patterns to men, such as taking career breaks and part-time roles.
So it‘s more important than ever, if you can, to keep your pensions going without a break and to make sure they are working as hard for you as possible.
How can you make the most of your pension savings? Well, here are a few things you should be doing right now.
1. Opt-in (or stay in) to your Company Pension Scheme
Thanks to the effects of compound interest the, earlier you start, and the longer you save, the more time there is for your money to grow. If you have a company pension scheme, then you’ll also benefit from your employer’s regular contributions and from pension tax relief too.
If you opt-out, you’ll lose out on this free money.
2. Pay in the maximum that you can afford
Find out what percentage your employer will match and aim to pay in at least this amount. For example, if your employer will match contributions at 8% then aim to pay in the same. This means you’ll be contributing 16% a month and you may get the government tax relief on top. If you can afford to pay any more on top, then that’s a bonus.
It’s not easy to put that money aside, but you’ll be so pleased you did.
3. Keep an eye on your pensions
There is no doubt that your pension will have been affected by the impact of COVID-19 on the economy and the stock markets. That’s why it’s more important than ever to monitor your pensions pots regularly and to take professional advice about how you could maximise returns over the long-term.
4. Set retirement goals
It’s vital to think about how much money you will need when you retire, so you can decide how much to put away now. The PLSA have recently launched their Retirement Living Standards which looks at the type of retirement you can expect, split into three groups: moderate, comfortable, luxury. These are a great place to start your pensions goals,
5. Most importantly, stay calm and carry on!
Pensions are a long-term investment in your future, and it’s important to stay calm when life sometimes throws up a curveball. If you can keep paying into your pension through this difficult period, even if it is a slightly reduced contribution, then you’ll enjoy the rewards when you come to retire.