I recently had a conversation with my best friends’ daughter, she wanted to know a bit more about her work place pension and saving for retirement. She has recently decided to enrol in university and peruse her dream of becoming a paediatric nurse. Nothing fills me with more pride that seeing the ones I love work hard for what they want and the fact that she is only in her early 20’s and has a good enough head on her shoulders to be thinking about her pension pot now almost brought a little tear to my eye.

But this got me thinking……

If you are someone in their 20s, you probably haven’t given too much thought to your retirement, after all, your only young. You want to enjoy your hard-earned wages on enjoying life before you think about settling down. But when you do settle down, you will probably be more concerned about your Mortgage, after all, that will be a huge expense.

Then, you might want to think about starting a family and as everyone knows, kids cost a fortune. You might want to wait until their a bit older before worrying about a pension.

Anyway, you will probably have a few years’ worth of contributions into a work place pension from your current or past employers. Phew, that will be enough to live a comfortable life, maybe travel a bit, spend time with friends and family. That would be great.

Unfortunately, millions of people will find such a comfortable existence out of reach, unless they start saving more into their pension.

Four in 10 people are not saving enough for their retirement and two in 10 are not saving anything at all, according to recent research by the Money advice service.

Research shows that 11% of men and 18% of women have not done any form of retirement planning. Even more worryingly, 17% of people aged 65+ have no plan. I look at a couple of the older generation in my own family and quite often worry. If they had just put a little aside for their retirement, things could look so different.

The fact that in general, People are living longer which means retirement is likely to be later than ever before and the younger generation of today such as my Neice, nephew and my own girls may be expected to work into their 70’s.  It’s a good job that I am married to an amazing financial planner.

Planning ahead and taking control of your financial future as early as possible is vital.

The good news is that it is never too late – or too early – to begin saving for the future. So here’s what I have been thinking………

Age: 20 to 39

Saving as early as possible into a pension will make a massive difference to the size of your pot. So if you are offered a workplace pension, it’s a good idea to say YES. Employers will also contribute to your pension, so turning it down is like saying no to free money. Even if you do not qualify to be auto enrolled into your workplace pension scheme,(you are under the age of 22 or earn less than £10k a year)  you ARE entitled to “Opt in” if you are employed and earn more than £5,825, you can ask your employer to enrol you into their workplace pension and you should be entitled to receive employer contributions from them too.

You also get tax relief when saving into a pension. This means that if you are a basic-rate taxpayer, for every £80 you put in, the tax man will top this up with another £20.

Investing 10% of your income or as much as you can afford would be a great start- especially if your employer matches your contributions. 10% sounds like quite a lot but if you earn £19,000 a year you could be adding around £36 a week into your pension scheme. That’s about the same amount as a trip to the Cinema and dinner would cost or that new shirt that you really didn’t need, (it really wasn’t your colour anyway).

Cashflow model based on monthly contribution from age 22-65 of £217pcm. Income taken as of 65yr of £2,500pcm

If you start at age 22 and save 10% of your £26,000 salary, and you achieve 6% investment growth, you end up with a healthy £600,000+ pot when you retire. Based on this level of contribution, an income of £2,500 could be taken from age 65 on wards and this “pot” of money would last until approximately 95yrs old. Few……that would put my mind at ease a little.

If you left it to age 30, you would accumulate £300,000 approx., while those waiting until age 40 would get just £150,000 approx.

Ok, so what else should you know……

Once you’ve opened your pension, read your annual statements carefully. Most people simply opt into the default “balanced managed” fund and then stuff their statements unread into a drawer. But taking more of an interest in your pension, and having the confidence to switch funds if necessary, is vital. Don’t be afraid to ask questions. “At age 28, how do I get the best from my workplace pension?” https://www.moneywise.co.uk/pensions/starting-your-pension/age-28-how-do-i-get-the-best-my-workplace-pension

You should always expect that the value of your pension pot may drop one year. DONT PANIC, Markets do fluctuate but investors need to remember that they are in it for the long term.

If you don’t like the idea of being unable to access your savings until age 55, consider opting for a stocks and shares ISA instead of a pension. This allows you to save up to £11,520 a year, with no tax to pay on income payments or growth in the value of the investment.

I know it’s probably true that when you are in your 20s, the last thing that’s on your mind is retirement. There is nothing sexy about pensions. But my experience is, 30 soon creeps up on you and then BAM!!!!! Your in your 40s with much less time than you think (I’ll get to this bit in more detail later).

So take a little tip from a forty something woman who DOES NOT want to be working too hard in her 60s, think ahead a little bit, don’t panic but don’t be silly. Opt into the work place pension and make the most of the employer contribution and buy yourself that new shirt if you really want it…….just make sure the colour matches your skin tone first.


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