How To Save For Your Pension

Anthony Burgess (Pension & Investments)

Written by Anthony Burgess (Pension & Investments) on January 21, 2019

Updated June 6, 2019

saving for a pension step by step

About a third of adults in the UK haven’t been saving for retirement. Also, one out of seven individuals about to retire doesn’t have a workplace or private pension set up. Even worse, those within the 45-55 age bracket have been found to spend most of their time setting up and planning holidays rather than working out retirement arrangements.

To ensure you enjoy a holiday and the quality of life you want once you’re no longer employed, you must begin saving for your pension.

Once you’ve made up your mind you want to save for your retirement, work out how you intend to do it. Putting funds in a pension comes with tax relief, and the money the taxman would have taken away goes into a pension pot of your own instead.

Come up with a contribution pot

According to the ONS (Office for National Statistics), the average spending in a retired household per year is about £21,770 while Which? puts the average that barely affords household essentials only as £18,000 annually. For those who want to factor in leisure and fun extras and holidays, the average annual amount needed is about £26,000 on average annually.

A couple would need a £210,000 contribution pot to accomplish their retirement income goal. Those in their early 20s only need a monthly saving of about £131 henceforth, those in their 30s around £200 every month and those in their 40s not less than £338 while anyone above 50 should put aside £633 and above every month to save for their future.

If you know you must start saving for your pension and haven’t, it’s not too late. Begin working on it right away whether in your 20s or late 50s. It’s never too late to start.

Think about what your retirement would require

Start by thinking critically about the amount of pension you need for an easy retirement. Take into account monthly expenses and bills, mortgage or rent payments or whether you live in a personal home, among others.

Do you have a state pension? Take it into account as well, including any other type of income you might have. In the process the gap in your retirement goals your desired pension will be filling will be very clear.

Mind national insurance

Note that state pension is very critical when it comes to retirement regardless of the amount you’re able to save anywhere else. Most important though is checking whether you qualify for it. When it comes to National Insurance, years you’ve contributed are more important than the amount you pay. To qualify for a complete start pension, you need to have a minimum of 35 years of credits or contributions.

Access your record of National Insurance online here and use it to check whether voluntary payments can be paid to fully cater for glaring holes in your pension and the cost of doing that.

Save a little more

Accomplishing your pension goals faster is great. If you’re able to access more funds to save for your pension, put in more as much as you can. This can be a bonus, extra income or pay rise and much more that could be channelled to your retirement contributions.

If you really can save more, it is wise to. You could cut back on spending and expenses that you really don’t need, rent extra rooms, find a part-time job or request regular overtime hours from your employer.

Just start

Whether you’re older or younger, it’s never late or too early to begin saving for your pension and a better future for yourself. Young adults believe they’ve time while older folks think they’re probably too late, but this isn’t the case. The young have lots of time to see their investments grow while older individuals have a tax-relief facility on pension contributions allowing it to grow sufficiently.

Think of what amount you need to retire depending on your current age and start from there. Talk to a financial expert if need be to get advice and help to craft the best way of setting up your retirement contributions and growing your savings.

Keep tabs on your pension

Once you start saving for your pension keep tabs on it to ensure it’s as you wanted. A yearly benefit statement is available with any pension scheme you choose to go with and helps shed light on your contribution pot performance. You might need to reevaluate your investment choices, make more contributions or create another pension.

Avoid checking your pension years later when retirement looms. If confused by rules, guidelines and best practices among other pension aspects get in touch with Pensions Advisory Service for free, impartial advice and direction.

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