Preparing for retirement may not be high on your priority list right now, but a little advance planning could save you tens of thousands of pounds when you finally quit work
Research has found that millions of workers fear their pensions will not be enough to sustain them when they retire.
The rising cost of living means that 26 percent of savers believe their current nest egg for retirement won’t pay the bills later in life.
The Pensions and Lifetime Savings Association (PLSA) found that those aged 35 to 54 are the most concerned, with almost a third concerned about how they will live without their salary.
This contrasts with 20 percent of those over 55, according to the survey of more than 2,000 people.
Rising energy bills, an increase in Social Security and rising inflation are raising concerns, the association said.
She calls for an increase in the automatic accession contributions to the company pension.
Personal occupational pensions come into effect automatically if you earn over £10,000 and are aged 22 or over.
Eight percent of your salary must be paid annually – of which at least 3% must be paid by your employer.
Experts say the government should increase those contributions to 12 percent by the early 2030s. Nigel Peaple, Director of the PLSA said: “We have argued that current contribution rates are unlikely to provide people with the level of retirement income they expect or need.
“As the government seeks to balance the economy and reduce wealth disparities between regions and different population groups, we think now is the right time for the government to commit to raising pensions.”
The current standard of living in retirement report states that a single person will need around £11,000 a year to meet the minimum standard of living.
This would be made up of the state pension and an occupational pension pot of £30,000.
A moderate standard of £20,800 a year would require a working pot worth £270,000.
A comfortable £33,600 a year would require a £590,000 job pot.
But how much should you save at each stage of your career?
Helen Morrissey, Senior Pensions and Retirement Analyst at Hargreaves Lansdown, told The Mirror: “In an ideal world, everyone would contribute to a pension by the age of 22 and not stop until they reach retirement age, but we know that this is rare the case is.
“If you start contributing later, you’ll have to contribute more to your pension to make up the difference. The minimum auto-enrollment contribution of 8% is a good start, but if you want a decent retirement income, you’ll probably need to be saving more than 12% a year from the start of your career to achieve that.”
One way to calculate how much you should part with is with a simple age calculation.
Morrissey explains: “The idea of contributing half your age, ie 15% when you retire at 30 and 20% when you retire at 40, is a good rule of thumb.”
Putting 15-20% of your salary into a pension may sound scary, but it’s important to remember that this amount includes the pension tax credit and your employer contribution, as well as your own money.
“You might find that if you increase yours – so-called employer match – your employer is also willing to increase their contribution and this can really increase your contributions, so it’s worth checking if your employer is doing this. “
But it’s important to remember that all goals are different.
“The amount you need to put in depends on what kind of lifestyle you want and when you want to retire.
“It is important to take personal responsibility for your retirement provision. Think about what you want out of retirement, then check regularly with a retirement calculator to make sure you’re on track. It’s also a good idea to increase your contribution with every raise.”
Consumer expert Martin Lewis has also commented on this calculation. That means you’re aiming for two-thirds of your last salary every year after you retire.
“To do that, you need to halve the age at which you start contributing, add a percent sign, and contribute that much each year for the rest of your life.”
For example, if you start paying contributions at age 30, you will need to contribute 15% per year for the rest of your career.
“But the earlier you pay into your pension, the less salary you have to hand over, of course.
“Even just £20 or £30 a month will add up over the years to give you a much better savings pot by the age of 55.”
Pension contributions are also tax-free – another incentive to save.
“The average worker pays 20% tax – so for every £100 you earn, you take home £80. With pension contributions, however, you get the full amount, meaning you’re actually getting a small raise by putting cash aside each month. ‘ Martin adds.
“This money is then invested in the stock market, a pension fund or an alternative investment over the course of one’s working life. The earlier you start, the more it can grow — but not until you’re 55.”
Anyone looking for further pension advice can contact the federal pension advice service free of charge.
Remember that cold calling pensions is illegal. If you unexpectedly receive a call, email, or message from someone offering retirement support, report it to Action Fraud.
https://www.mirror.co.uk/money/simple-age-test-tells-you-26719168 A simple age test tells you how much you should save for your retirement each year