When it comes to saving for retirement, it’s easy to put it off. There are bills to pay, rent or mortgage payments to budget for, student loans to pay off and fun to have now. When the current retirement age for someone born in the year 2000 is 68, there’s plenty of time to think about a pension, right?
Maybe, but the simple truth is that the sooner you start saving for your retirement, the better. It will give your money more time to potentially grow. If you leave it until later in life, you’ll need to save more in less time.
Calum O’Donnell, Chartered Financial Planner at Alan Boswell Group says “When we decide to stop working, we need to pay ourselves. Putting money away for this purpose stores up your future spending power. A pension is a fantastic way to do this, as it can be a pretty easy way to save.”
Read more: Employers guide to salary sacrifice pensions
How much do I need to save for retirement?
This depends on how much you earn, but anyone aged over 22 in the UK who earns more than £10,000 a year will be automatically enrolled into a workplace pension. This is great because your employer makes contributions to your pension on your behalf (the minimum amount for an employer to contribute went up to 3% in April 2019), in addition to the percentage of your salary that you pay in. The government also contributes in the form of tax relief, adding £2 for every £8 you put into your pension – basically free money for your retirement!
Of course, it can be difficult to prioritise future saving when there are things to pay for now. Calum has some advice for this “For some people, paying the bills will be all they can do. Still, it’s important to remember to pay ourselves first. Establishing good habits through automatic saving is the best way to get started, even if it’s with a small amount. The earlier you start, the harder your money will work for you.”
So how much could I save?
According to Scottish Widows, if you’re 24 and aiming to retire at 65 and start saving now you could receive a pension:
- 28% higher than if you waited 5 years and made the same monthly payments
- 68% higher than if you waited 10 years and made the same monthly payments
- 21% higher than if you waited 5 years and made the same single payment
- 47% higher than if you waited 10 years and made the same single payment.
No matter how old you are, it’s always worthwhile considering your pension options. With so many financial pressures, saving for your retirement can feel low down on the list of priorities, but the sooner you start saving the easier it will be to make sure you’ve got enough money set aside to do the things you want to do later in life.
Still not sure about saving for your future? Call us today and speak to an expert about how to reach your retirement goals.
Please note, the value of an investment and any income from it can go down as well as up and you might not get back the original amount invested. The past is not a guide to the future.
The value of tax benefits depends on your individual circumstances and the laws concerning these can change.