The
state pension fund is running out - Tricia Phillips explains what this
means as well as how you can ensure that whatever happens, you can face
life after work with confidence
A report from Government advisers has revealed the National Insurance Fund, which pays state pensions and other social benefits, will run out of cash in the 2030s .
This means future pensioners face lower state pensions or younger workers may get slapped with higher National Insurance contributions.
Andrew Tully, pensions technical director at Retirement Advantage, said: “There is no cast-iron guarantee that the system pensioners enjoy today will be around in the same guise in the years to come, so it makes sense to take control of our own retirement future.”
With uncertainty ahead, here’s some top tips and advice...
15 top tips to help you save
- Don’t rely on the state pension
- Whatever your age. The state pension age keeps rising. Young people
now face working until their 70s and beyond before they will qualify -
and get less than they expected.
- Pensions aren’t as complex as they seem
- During your working life, you put a bit of cash away from your
earnings each month and that builds up to create a pot of money to see
you through retirement. Then you cash them in and buy a pension income.
- It costs less than you think to save
- Tax relief on pension contributions is a generous Government
giveaway. Every £100 you put into a pension only costs you £80 with tax
relief. For higher-rate taxpayers it’s even better.
- Start saving early
- In your 20s, or as soon as you start work, is the time to start the
long-term savings bug. Andrew Tully says to build up a £100,000 pot by
age 65, you’ll need to save £91 a month from age 25, £148 from age 35
and £266 from age 45. This is because of compound interest – where you
earn interest on interest over the years.
Click to play - Stay autoenrolled in your workplace pension
- Don’t opt-out of a workplace pension – it’s turning down “free money”
from your employer. Under auto-enrolment, you make contributions into
your workplace pension and your boss chips in to boost savings.
- Put in more than the minimum
- The current minimum legal contributions into workplace schemes are 1%
from workers and 1% from bosses. This increases to 3% from workers and
2% from bosses in April, and to 5% from workers and 3% from bosses in
2019. Some firms will match employee contributions up to a higher level.
- Don’t forget about your pension savings
- Don’t leave your hard-earned cash languishing. Keep an eye on it to
ensure you’re on track to build up the funds you will need. Take notice
of annual statements so you know where you stand and can decide if you
need to chip in a bit more.
- It’s never too late to start saving
- Workers in their 50s still have time to build up a bit of a nest egg.
Chances are you’ll be working until your late 60s, so there is time.
Every £1 saved into a pension will give you that plus a bit more in
retirement.
- If you’re self employed
- You’ll need to sort out your own pension savings. Under 40s can use
the Lifetime ISA, which gets a 25% Government top-up on up to £4,000
each year, until age 50. Over 40s will need to set up a private pension.
Visit unbiased.co.uk to find an adviser.
- Think you can’t afford to save
- If you get a shop-bought coffee each day at £2-plus a pop, giving up
one or two a week will free-up cash to save for your older age. Once you
start looking at small ways like this to make savings, you’ll be well
on your way to a more secure financial future.
- Keep an eye on costs
- Fees charged by pension providers can vary and eat into your funds.
Jamie Smith-Thompson, managing director of pension advice specialist
Portafina, says: “What seems like a small change could make a big
difference. For example, reducing your annual provider fees by just 1%
could mean £25,000 more in your pot over 20 years.” Check the market for
schemes with lower fees and think about switching.
- Review where - your money’s invested
- Ensure your pension savings are working hard for you. Check the funds
you’re invested in match your attitude to risk. Keep an eye on how your
savings are growing, and move funds if you think you can achieve a
better return.
- Flexibility to suit your needs
- The pensions freedoms put you in control of when and how you access
your savings from the age 55. But be wary of dipping into your pot too
soon. Get free advice from the Government’s Pension Wise via pensionwise.gov.uk or call 0800 138 3944 to book an appointment.
- Find old pensions
- Most of us will work for a number of employers and it can be easy to
lose track or forget about funds from past jobs. Get free help to track
down lost pensions from the Government at gov.uk/find-pension-contact-details .
- Don’t let crooks steal your cash
- If you get a cold call offering a free pensions review or an
investment offer that sounds too good to be true, put the phone down.
Crooks are just waiting to rip you off. Don’t rush into transferring
funds or accessing savings before ensuring a person or firm is on the
Financial Conduct Authority’s register at register.fca.org.uk . Also check the FCA Scam Smart page at fca.org.uk/consumers/protectyourself-scams .
Culled from Mirror Pension
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