How your pension can contribute to your future

It’s great news that as a nation we are living longer.  Once retired that means more time to travel, spend with family, learn a language or start a new hobby – whatever takes our interest.

But, more years of freedom after retirement age can bring its own set of problems.  For many people, there is an ever increasing gap between our expected quality of life after retirement and the reality that we find ourselves in.  We may experience a significant chasm between what we desire and what we can afford.

The answer to bridging this gap is clear – start saving now for those years ahead (if you haven’t already!)

While it might not seem like a top priority towards the start of your career, especially when there are many more immediate demands on your salary, it is important to be prepared.  Strike a balance between what you want and need to spend now and making those preparations for the future.

Tips for planning your pension:

Do your homework

Before making any decisions, it’s vital to know what pension options are available: the different types of products, how they work, how to contribute and if any other sources pay in for you.

Recognise how the state pension will benefit you (£155.65 per week as of April 2016), be aware of workplace pension auto-enrolment and your place in the scheme (what you contribute, what your employer may give and any tax relief you’re entitled to) and, of course, understand the value that private pensions can bring to future stability.

Do your research – consider the total savings pot you’d like to have and work backwards to achieve this. Or look at how much you could afford to save now and work out what that would give you in the future.  View your savings strategy in whatever way works best for you!  Plus make use of tools like the Money Advice Service Pensions Calculator.

Shop around – before you make any decisions, take some time to research the pension products available to see which best meet your needs.

Start early

It sounds obvious, but that is because it is true.  The earlier you start to save, the more you will have.  The greater your savings pot, the greater the opportunity for growth.

While it is never too late to start, the earlier you can put on your pension hat, the better.

Review your chosen pension plan

With the myriad of options available and with the information provided often being complex, it is sometimes simply easier to stick with whatever option you chose at the start.

Try not to be put off by the quantity of information and variety of options.  From time to time, review the product you have and consider if it is still meeting your needs.  If it isn’t, it’s time to shop around again.  Research what’s out there to make sure you get what is best for you.

Make sure you save enough

Don’t forget inflation! The cost of living at your retirement age and the effects of inflation will mean that the actual, tangible value of your savings pot will be less in the future.  For example,  £20,000 now will get you more value than £20,000 in 30 years’ time.

So, quite simply, make sure you are saving enough throughout your working life to give you the level of comfort and freedom you want in the future.

Increase when you can

To plan well for the future, it pays to view each increase in your salary as an opportunity to save a little more.  Consider making it a habit that each time your pay increases a percentage is siphoned off towards your long-term pension plan.

Mix it up

If it’s possible within your financial circumstances, consider looking at other long-term savings opportunities to complement your pension plan.  Property investment or savings in other financial products such as ISAs are a way to spread your savings.

Don’t forget, not everything needs to be done at once.  Additional savings can be considered as your career opportunities increase and your salary grows.