Tips to save for your pension
You are aware of pensions, you hear people discussing pensions, so when you retire you will expect a healthy pension waiting for you in your bank, right? Unfortunately this won’t be the case, unless you take action. So where to start?
Craig Palfrey, director at retirement specialists, increaseyourpension.co.uk, provides a step-by-step guide to retirement planning through the ages.
There are common factors throughout the ages; the new Workplace Pensions that are slowly being introduced will mean many people will be offered contributions from the employers for the first time, in the next few years. In most cases, the vast majority, these should be taken with gratitude regardless of age.
As women continue to live longer than the average man, the importance of topping up your pension pot and planning for your retirement can be even greater for a number of women.
I would suggest there is a basis for any woman of any age to plan for their retirement by undertaking a cash flow financial analysis.
For years people have relied on pension’s illustrations and quotes to work out how much to save - but this is just a blanket approach that can produce confusing and unreliable figures.
Craig PalfreyA cash flow forecast works at any age and also is completely bespoke to the individual. It also takes into account the whole picture of your current position and future expected - or desired – expenditure. It is not narrowly focused on the pension side.
Cash flow financial planning is the modern way of working out what to save and when. A cash flow forecast is similar to the way a business projects its finances into the future, a combination of a budget and projection of future income and expenditure. On this basis, any individual can tailor their savings plans for retirement to match their expected future expenditure and map this out year by year, reviewing it in the future as they move forward.
Looking at the different stages here is our take on the main factors for each age group:
Women in their 20s
You are in a wonderful position, because, simply, they have a long way to go. Also, at this stage, relatively small amounts saved can build into big amounts in the long term because they have the best chance of maximising the magical benefit of compounding returns. This is the age to start and get the saving habit underway.
Women in their 30s
This is the time when family and mortgages start to loom large. If you are planning on taking maternity leave, do try and maintain a pension contribution. A lot of people think they have to be earning to pay in to a pension, but actually a stay-at-home parent, or someone taking time off with the kids, can still contribute £3,600 per annum to a pension - even if they don’t have any income to speak of.
Women in their 40s
There is still time at this stage to make a difference to your final pension pot. For many, this is the period when some women enjoy income rises and greater prosperity. At this stage it may be possible to rapidly enhance retirement savings, and this could be an important factor when negotiating pay improvements or a new job.
Women in their 50s
This is when it may be important to start thinking of clearing the decks (or debts as the case may be!) looking at getting a mortgage paid and starting to think of how retirement income will be generated. Hopefully by this stage there is some money saved and 'in the retirement pot' otherwise it could be too late to make anything other than a marginal difference.
Women in their 60s
This is likely to be the stage where retirement occurs or is on the horizon. At this point plans may start to shift from accumulation to income production - a stage now that typically plays out gradually over a few years. The recent changes to how private pensions can be drawn may make a big difference to this age group.
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