Rathbone Investment Management offers the following tips.
1. Know what you already have
Under the auto-enrolment rules introduced in 2012, UK employees over the age of 22 (but under state pension age) and earning more than £10,000 before tax each year are eligible to be auto-enrolled into a pension scheme.
This means that you and your employer could already be contributing to your pension fund. In fact, if you’ve held several roles at different companies, you could have a number of pensions – though you will only currently be contributing to the one started by your current employer.
If you’re self-employed then the onus is on you to invest in a pension yourself through one of the types of pensions that can be held privately, away from your employer such as a Stakeholder, Personal Pension or a Self-Invested Personal Pension (SIPP).
Establishing how much you already have saved will help you to understand and plan for saving in the future. If you have multiple pensions you may consider consolidating these into one pot for ease.
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2. Picture what you would like retirement to look like
When do I plan to retire? How do I plan to spend my retirement years? How much do I need in my pension pot to live comfortably? If you haven’t already asked yourself these questions, you should start now.
To live a comfortable retired lifestyle requires careful planning. First you need to know what you want your retirement to look like, then you can work out how much you’ll need in order to make these plans possible.
A financial adviser will be able to help you with these calculations and ensure you are on track to have enough to meet your goals whatever they may be.
3. Power through the jargon
Learning about pensions can be overwhelming. However, being well-informed about your pension is vital to ensure you make the best decisions with your money.
Speak to people in retirement already, read up on it and have a conversation with a financial adviser about pension investments if in doubt.
Once you have got to grips with the jargon, you’ll come to realise it’s not that complex, and feel more empowered to make decisions about your money and future. Read This is Money’s jargon buster here.
4. Start early
Your pension is meant to fund your lifestyle throughout later life – which costs a fair amount of money. The earlier you begin to put away money in your pension pot the better because it will have a longer period to earn interest or investment returns.
It’s particularly important due to inflation which can have the effect of eroding the actual value of your funds.
Making regular contributions also means you can benefit from compounding, as well as managing any market volatility. In addition some employers will offer to match contributions if you increase yours.
5. Mind the gender pension gap
Sadly, the gender pay gap still means women earn on average less than men in their careers so it’s even more vital for women to engage with pension savings early on.
Family obligations also mean they take more career breaks and often work part time: all factors often leaving women with significantly less saved into their pension pot by retirement.
Indeed, the Pensions Policy Institute found that women in their 60s have £100,000 less in their pension than men of the same age.
While some of the drivers of the gender pension gap will take time to solve, taking an active role in saving for retirement from an early age will go some way to closing the gap. Read more here on how to achieve this.
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