In times of austerity, people are looking for immediate relief, and ways to help them in the short term, with long term investments such as pensions taking a back seat. But this is just the time when you should be revisiting your pension plans and making sure that everything is working as well as it can, so that you do not have to worry in your old age. The problem with pensions is that once you have reached your pensionable age, if you have made mistakes with your funds, there is little you can do about it, in relation to time and money. So it makes sense, even if you feel you are struggling with bills now, to try and sort out what you can, while you still have the chance to.
And when you bear in mind that people are living longer, with more than ten million people expecting to live to see their 100th birthday, almost four in ten UK adults do not have a pension, and of those four, 1.4 million are within a decade of retiring, you need to know whether you are saving enough for your retirement years.
1. So what is enough?
Basically, people need on average around £24,300 a year to live relatively comfortably, when they retire. However, according to the National Statistics Office, in 2010/11 the average male pensioner had only a pension income of £319 a week or £16,600 a year. That works out at a shortfall of nearly £8,000.
So find out if your pension on track. Get in touch with your pension provider and ask them to assess how much retirement income you would be eligible to receive and if there is a shortfall, how much more you should consider saving to meet your target. You should also ask them if inflation and charges have any impact on your pension.
2. Don’t delay saving
If you are young, you might be putting off saving for your pension, but the longer you delay the more it will cost you to build a good-sized pension in the long run. Basically, for every ten years that you delay in starting a pension, you will reduce your pension funds potential growth by half. So the sooner you starting paying into your pension, the more time and the more potential it has to grow. The longer you delay, the harder it gets, as you will have to make larger monthly payments. And eventually, don’t forget, you will run out of time.
3. Check your pension
If you have been clever and sorted your pension out when you were younger, have you ever checked it out? Or do you just glance quickly at those yearly statements and file them away somewhere? Do you even know who your pensions are with? Many can’t, in fact, more than two in five adults (41%) – 8 million people – cannot remember how their pensions are invested.
It is important to see how well your savings (for that is essentially what they are) are doing, as even a small difference in performance, over a long period can make a significant impact on the size of your pot. If the thought of annual fees and investment taxes fill you will dread, get some financial advice from a specialist pension adviser, and don’t be afraid to swap your fund for one that shows a better performance rate.