If you’ve read my post, When should I have planned for my retirement? you will know that I’m late to the party when it comes to pension planning.
It’s 2017 and I’m nearing 40 and have at last finally decided that it is time to think seriously about planning for old age. I’ve taken the necessary steps with my employer to rejoin the workplace pension and am thinking about ways to increase my income.
I know that I can’t rely on the state pension when I retire and this of course is assuming that it will still exist and if it does, what would it look like? As at writing the state pension is £159.55pw, clearly being able to support a nice lifestyle would be difficult with this being my only source of income.
Who is saving what and where are they living?
Findings from UK private pensions provider, True Potential Investor, has shown that a larger proportion of women (41%) saved nothing towards their pensions in Q3 2016, compared to their male counterparts (31%). Though an equal amount of men and women were able to save over £5,000 in the same quarter(5%).
How well is your region saving towards retirement? Figures and findings may surprise you – read through the graphic below to find out more.
If you are still unsure whether a pension is right for you here is a list of pros and cons of a pension as featured on money.com
- Compound re-investment
- Tax relief
- Guaranteed income
- Employer matched contributions
- Investment risk
- Cost of an annuity
- Decreasing value of your income
Why you probably don’t already pay into a pension
Wages are being squeezed, so it’s unsurprising that those in work don’t feel like they can afford to save into a pension.
What with rents on the increase or unpredictable mortgage rates, unless you have fixed your mortgage, associated costs of running a household, living expenses and family commitments we prioritize our lives now and not our future selves and who could blame us.
It all begins with our mindset
We have a not now mentality
Some will no doubt be of the view that the state is going to look after us in old age. Whilst this might be true to a certain extent, having worked all your life, do you want to end it not being able to afford your well deserved retirement.
They are a waste of money.
Some see pensions as a scam purely designed to benefit those in the financial market. We only have to look at recent events at BHS to see why some might hold this belief.
So looking at the information provided by True Potential Investor, I feel a little better knowing that I’m not the only one that has put off pension planning, besides there are so many other things that we could be doing with our money besides making provision for old age.
Many of us think nothing about entering into PCP arrangements for cars that otherwise we would not have been able to afford.
If you thought about it logically if you were paying £150 per month over three years on a PCP arrangement at the end of the period you would have spent £5,400 and that is not including the deposit you would have no doubt had to put down, this is £5,400 that you are not going to see again.
Investing this in a stocks and shares ISA could have potentially increased this capital investment, but you have to remember that your capital would have been at risk.
Working by itself isn’t’ going to look after you in your old.
Think seriously about ways of increasing your income and then investing this in multiple income streams. Earning more doesn’t mean that you have to increase your spending.