SAVING hundreds of thousands of pounds for retirement can seem like an impossible task but a few simple steps can get you where you need to be.
The sooner you start thinking about how to afford life when you finish working the better.
For a comfortable retirement, it’s estimated you need £43,100 a year to live on, according to the Pensions and Lifetime Savings Association.
The full state pension is currently £11,502 a year, meaning that you’re looking at a sizeable gap if you have no other savings.
Finishing work at the state pension age of 67 and living into your eighties, you’re looking at a nest egg of around £775,800 to have a comfortable retirement.
Here’s how you can build up the sum that you need…
A 29-year-old today earning a salary of £30,000 and saving the minimum 8% into their pension could have a pot worth about £190,000 by age 68, according to calculations by pension provider Aviva.
However, if you raise the amount you are saving you’re going to be on course for a bigger pot.
Boosting contributions to 20% of salary, with an extra 10% from their employer, would mean about £700,000 by age 68.
Of course, if you start saving before the age of 29, you’ll have longer to save and won’t need to eat into your salary as much to get the require sum.
If you are older than 29, you could look at making bigger contributions depending on what you can afford.
Often workplace schemes will match employee contributions up to a certain level, in effect giving your free cash.
Some employers also give the option of salary sacrifice schemes.
Through these initiatives you agree to take a pay cut with the money instead funnelled towards your pension instead.
The employer pays less in national insurance contributions and pay pass the savings on to your pension giving you extra cash for your nest egg without saving anything extra.
Alistair McQueen, head of savings and retirement at Aviva says: “It is a good idea to consider what factors could influence the eventual value of your pension at retirement.
“Small changes to the amount you save, where you invest, and the charges you pay could make a significant difference to your income in retirement.
“Your pension is your future. A little more control today could reap a lot more reward in the future.”
Switch provider
If you’ve had a few different jobs, you’ll likely have had more than one pension pot.
The typical so-called lost pension pot is worth around £9,500, according to Aviva, and it’s thought as many are 2.8million are waiting to be claimed.
The firm has a ‘find and combine’ pension tracing, checking and consolidation service that can help you find a pot.
You can also use government’s online Pension Tracing Service (or call 0800 731 0193) to help track down lost pensions.
It can often make sense to consolidate pots so that you pay less in fees and it becomes easier to check in on investment performance.
Pension schemes charge fees each year to cover costs, but the difference in fees can have a huge impact on the overall savings pot you end up with.
For example, a £100,000 pension pot switched from a product with total charges of 1.5% to a platform where charges total 0.75% (for custody and funds combined) could be worth £11,000 more in in ten years’ time, according to calculations by investment platform AJ Bell
Charlene Young, pensions and savings expert from the firm, says: “For many people combining their pension pots could save them time and reduce hassle, making it easier to manage their retirement savings in one place.
“It could also boost your retirement prospects, since higher charging pensions can eat away at your returns.”
Check your investments
Pension cash is invested by your pension firm. Under a workplace pension money it is typically funnelled into a ‘one size fits all’ default fund.
However, if your are younger you can generally afford to take more risk with your investments. The theory is that you may have some bigger short-term losses but these should be balanced out by bigger gains over time.
Or someone older may want to switch into very low-risk options.
Managing investments is an intimidating task, but even just checking in with your pension performance each year should give you an idea of what your hard-earned savings are doing.
You can speak to a financial adviser about your options if you are not happy and thinking about switching out of a default fund.
IF you have several workplace pensions that you're no longer paying into, you might be better off consolidating them into a single pot.
There are several advantages to this.
The first is that by having your savings all in one place, you’ll only pay one set of fees.
You can also choose which pension provider you want to transfer the different savings to, so you can pick the best one for you.
It also makes it easier to keep track of your money.
You might want to move all your money to whichever of your existing pots has the best fees, or you could move it all to your current employer pension (if you have one).
Alternatively, you may wish to move money to a private pension or use a consolidator service, such as Pension Bee, Aviva, or Wealthify.
Make sure you compare and contrast your options carefully so that you’re picking the best home for your savings.
You’ll need to look at fees but also might want to consider the investment options available.
If any of your pots are over £30,000 you’ll need to get independent financial advice, but even if you have lots of smaller pots you should consider speaking to an independent financial advisor (IFA).
You can use Unbiased or VouchedFor to find a recommended advisor near you.
Also ask whether you’ll be charged a fee to exit your existing provider and to join your new provider, plus whether the age at which you can access your pension is different – for most people this is currently 55, but is set to rise to 57.
You also need to ensure the pension you’re leaving doesn’t come with valuable added perks, or you could lose out.
Stay alert for pension transfer scams as fraudsters often target people transferring their pension with promises of investments that are too good to be true.
