Why you should start saving into a pension early
In your twenties, “the future” might mean the next year, the next six months or just the next weekend. By your thirties, you might be thinking in terms of five or 10 years; by your forties or fifties, the second half of your life.
But there are potentially big rewards for anyone who, at whatever stage of their life, can lift their gaze from their immediate priorities and think longer term to retirement. It’s not easy, particularly at a time when the cost of living is increasing. We all have many demands on our income, whether it’s paying your rent or mortgage or the utility bills. But, your future self will thank you for spending a bit of time to understand why saving into a pension now, could be one of the most financially beneficial things you ever do.
Benefits of saving early
The big advantage to starting to save early is that your money has time to grow.
Not only does the money have more time to grow, but each year you are investing a bigger pot. So over time, you may achieve a bigger return although this isn’t guaranteed. That approach means that the earlier you start saving, the more opportunity you have to achieve a sizeable pension pot and a more comfortable retirement. Investing over several decades helps to spread the risk.
Best of all, saving into a pension means your money is boosted by tax relief. Find out more about how pension tax relief works here.
Even if you weren’t able to invest much into your pension early, you can still increase your contributions at any age. But how do you know how much to save?
A first step is to look our retirement living standards tool for an idea of what income you might need for the lifestyle you’d like. Remember the State Pension is unlikely to fund a very affluent life; the full State pension in 2023/24 will be £10,600, so it’s worth thinking about how much you’d need on top of this.
The next step is to use our retirement planner to see whether you’re on track to achieve the lifestyle you might want.
Make the most of your employee benefits
Building up a pension pot isn’t something you have to do by yourself. We’ve already seen that the government will help increase your savings, through tax relief. With a workplace pension, your employer will also pay in. The minimum is 3% of your gross salary, provided you earn more than £6,240 a year. Many employers may make additional contributions, so it’s worth checking that you’re making the most of your employee benefit.
That’s a very big plus. But it’s also an easy way to save, because the money is taken off your salary before it’s paid to you – meaning you’re less likely to miss it (or spend it!).
Most of us don’t question the amount we’re saving into our workplace pensions; we accept the recommended amount. But you can increase how much you save (and potentially, how much more your employer pays in). Just ask your employer or pension provider.
Small increases now can mean a bigger impact later
It’s never too early or too late to think about your future. The important thing is to arm yourself with the information to make decisions.
Try to make it a regular part of your life to check in with your pension savings. You’ll see how much your money has grown and whether you’re on track to make your retirement as comfortable as possible. It’s quick and easy to log in to your account at myaccount.landg.com any time and find out what your current situation is. There you can see what your pension pot is worth and how much you and your employer are paying in every month.
If you want to make any changes, contact your employer or go to your scheme microsite. This is your future, so let’s make sure it’s the future you want.