The Government’s new pension scheme will begin to be phased in from this October, however, it will be five years before all of the country’s employers are fully signed up, a delay which could knock almost 20 per cent off your pension pot, according to industry figures.
To help you get the most out of your savings, whether you’re just starting out or want to check you’re still on the right track, we’ve put together a few tips for efficient pension saving:
Don’t Opt Out
If you turn down you company’s offer of a pension scheme you are effectively saying no to free money. Many employers also offer to match any contributions (up to a limit), so paying a bit extra when you can could be well worth it.
Take Advantage of Tax Relief
Pension funds are a particularly tax efficient investment, paying into one can guarantee to boost your investment by 20 per cent (40 for higher rate tax payers). Many funds allow up to a quarter of this to be taken as a tax free lump sum at the age of 55.
Don’t Put your Eggs in One Basket
As well as pension schemes saving through an ISA or savings account, taking advantage of equity in your home, and other types of investment, can be effective ways to ensure you have enough money to retire on.
Start Early and Save Hard
Studies have shown that contribution levels and length of time invested have a much larger impact on the eventual payout than choice of investment or charges. A seemingly miniscule 4 per cent difference increase in contributions could increase the final amount by 50 per cent or more, and thanks to compound interest contributions made earlier in life are effectively worth more.
Check your Funds Performance
Although you don’t want to be switching funds every couple of years, it is important to ensure that your returns are keeping ahead of deposits and inflation. Make sure you know the risks your money is being exposed to..