Despite good intentions, the average new year’s resolution lasts less than a month. Psychologists will tell you that one of the main reasons for this is that people’s goals are often too vague, making them much harder to achieve.
When thinking about your financial goals for 2020, we’ve set out some clear tips to help you get your pensions savings on track.
- Don’t delay
Start saving today and get into the habit of pension saving early. Unsurprisingly, the longer you contribute to a pension, the more money you will have saved. Although currently auto enrolment minimum contributions are set at 8%, we recommend putting away around 12% of your salary (made up of yours and your employer contributions) to ensure you are saving sufficiently.
- Don’t opt-out
If you’re auto-enrolled into your employer’s workplace pension scheme, don’t opt-out. If you opt-out of your workplace pension scheme you could be missing out on crucial contributions that your employer makes on your behalf – it’s like turning down a 3% pay rise. Plus, you will also enjoy a tax benefit from the government.
- Do pay in the maximum that you can afford
Find out how much your employer pays into your pension and always pay the highest contribution that you can afford. Again, we tell everyone that you should aim to be saving 12% of your annual income (before tax) in order to save for a comfortable retirement. Any more than that is a bonus! Another tip, as women live for four years longer than men on average, it’s recommended that they have saved 5-7% more than men to cover these extra years in retirement.
- Do make the most of your employer’s contributions
Employers will often meet your contributions up to a maximum percentage, so always pay in enough in order to maximise your employer’s contribution. After all, it is free money. Check with your employer if you’re not sure what they offer.
- Do review your pension savings regularly
Make sure you log into your pension scheme portal and check your pension pot regularly. You should be able to review your pension savings in real time. The introduction of the pension dashboard will make this even easier.
- Do put extra money in
We all have immediate needs however if you are in surplus, no matter how small, do contribute more money to your pension. For example, if you’ve had a pay rise or you’ve recently received a bonus, don’t forget to treat your pension pot too!
- Do track down your money
If you’ve had multiple jobs, it’s likely that you’ve got a few separate pension pots scattered about. Make sure you track them down and consolidate them where needed. You can find them with the Government’s Pension Tracing Service website.
Eleanor Levy, Director of Marketing and Communications at NOW: Pensions, said: “To get the type of retirement that you deserve, it is important that you continue to monitor the health of your pension pot and seek advice if you ever feel stuck. You can find guidance through your employer, pension provider or by checking out the PLSA Retirement Living Standards guide. The sooner you start saving, the easier it is to build up a sufficient pot. Retirement can seem a long way away, but your future self really will thank you for starting to plan and save now.
Notes to editors
At a cost of £10,200 per year for a single person and £15,700 for a couple, the minimum living standard covers all your needs plus enough for some fun – including social participation and social occasions. For example, you could holiday in the UK, eat out about once a month and do some affordable leisure activities about twice a week. The good news is that through a combination of the full state pension of £8,767.20 per year, and auto-enrolment in a workplace pension, this level should be very achievable for most people.
This lifestyle (£20,200 a year for singles and £29,100 for couples) provides, in addition to the minimum lifestyle, more financial security and more flexibility. For example, you could have a two-week holiday in Europe and eat out a few times a month. Savers would have the opportunity to do more of the things they want to do.
As this level (£33,000 a year for singles and £47,500 for couples), retirees could enjoy some luxuries like regular beauty treatments, theatre trips and three weeks in Europe a year.
Roughly speaking, a single person will need about £10k a year to achieve the minimum living standard, £20k a year for moderate, and £30k a year for comfortable. Like 5-a-day, this can be briefly summarised as 10k-20k-30k. For couples, it’s 15k-30k-45k.
The standards cover a range of goods and services that are relevant for the majority of people. Currently most people when they reach retirement do not have mortgage, rent or social care costs. These and other costs such as tax on pension income may need to be added depending on individuals’ circumstances.