Rathbone Investment Management offers the following tips.
1. Know what you already have
Under the automatic enrollment rules introduced in 2012, UK employees over the age of 22 (but below the statutory retirement age) and earning more than £ 10,000 pre-tax each year can apply. automatically enroll in a pension plan.
This means that you and your employer could already contribute to your pension fund. In fact, if you have held multiple positions in different companies, you could have a number of pensions – although you will currently only contribute to the one started by your current employer.
If you are self-employed, it is your responsibility 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).
Determining how much you have already saved will help you understand and plan your future savings. If you have multiple pensions, you may want to consider consolidating them into one pot for convenience.
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2. Imagine what you would like your 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 fund to live comfortably? If you haven’t already asked yourself these questions, you should start now.
To live a comfortable life in retirement requires careful planning. First you need to know what you want your retirement to look like, and then you can figure out how much money you will need to make these plans possible.
A financial advisor can help you with those calculations and make sure that you are on the right track to having enough to achieve whatever goals you may have.
3. Power through jargon
Learning about pensions can be overwhelming. However, being well informed about your retirement is essential to ensure that you make the best decisions with your money.
Talk to people who are already retired, read them, and talk to a financial advisor about retirement investments when in doubt.
Once you have mastered the lingo you will realize that it is not that complex and you will feel more empowered to make decisions about your money and your future. Read This is the Money Jargon Breaker here.
4. Start early
Your pension is meant to finance your lifelong lifestyle, which costs a considerable amount of money. The sooner you start putting money into your pension fund, the better, as it will have a longer period to earn interest or returns on your investment.
This is especially important because of inflation which can erode the real value of your funds.
Making regular contributions also means that you can benefit from funding, as well as managing any volatility in the market. In addition, some employers will offer you to match contributions if you increase yours.
5. Pay attention to the gender pension gap
Unfortunately, the gender pay gap still means that women on average earn less than men over the course of their careers, so it is even more vital for women to commit to retirement savings early on.
Family obligations also mean they take more career breaks and often work part-time – factors that often leave women with significantly less savings in their retirement funds before retirement.
Indeed, the Pensions Policy Institute found that women in their 60s have £ 100,000 less in their pensions than men of the same age.
While some of the drivers of the gender pension gap will take time to resolve, playing an active role in saving for retirement from an early age will go some way to closing the gap. Learn more here on how to achieve this.