How To Get On Top Of Your Pension Once & For All
Created in partnership with MONEYBOX
The Problem: Why Millennials Are Struggling To Plan For Retirement
Many young adults will tell you they have high hopes for retirement, but they’re struggling to plan effectively. According to recent research from financial app Moneybox*, young adults aged 20-40 ideally want to retire at 59 on a retirement income of £26k a year. Encouragingly, more than half have already thought about how much they are going to need in retirement and 61% expect to enjoy the same or better standard of living as their parents. And yet, almost half of those with old workplace pensions don’t know how much is in them and only a few are contributing to a personal pension. It should come as no surprise, then, that the vast majority say they’re concerned about saving for their retirement – a third extremely so – and want to find an easier way to get on top of their pension.
*Research by Moneybox, September 2021, 2000 young adults surveyed aged 20-40.
The Solution: How Moneybox Can Help
The same research shows only 11% of young people have chosen to consolidate their old workplace pensions and track how they’re performing, and lots said it felt impossible to know how much they will need. Many are simply too scared or overwhelmed to think about it. Thankfully, the Moneybox app can help.
The app's Pension Provider Search Tool can help you track down your old workplace pension providers for you. Then, a team of Pension Detectives will do the heavy lifting and help you consolidate your old pots into one simple personal pension, so you’ll have full control and visibility over where all your pension savings are invested. You’ll even be able to track performance over time alongside your other short and mid-term financial goals.
Equally, the Moneybox Pensions Academy is full of helpful information. Visit the online portal to pick up some useful tips – via a range of informative videos and infographics, you'll be able to find out how to start saving for your retirement in your 20s, 30s or 40, whether you're working with old workplace pensions or starting from scratch.
Want To Know More? Here Are Moneybox’s Five Simple Steps To Help You Take Control Of Your Retirement Savings...
Set A Goal To Stay Focused
A great first step is to think about the annual income you would like to have each year when you retire – if you're not sure where to start, the Moneybox Pension Calculator can help. A good benchmark could be two thirds of your current annual salary assuming that by retirement age you’ll likely have reduced some outgoings such as commuting costs, mortgage and childcare costs, but want to enjoy a similar standard of living as you have now. It's a good idea to keep reviewing this figure as your salary changes throughout your working life and you get closer to understanding what your retirement outgoings will be. Now that you have a better idea what your ideal retirement looks like, it will be easier to stay focused on building up your pension pot.
Track Down Your Old Workplace Pensions
On average it’s estimated that millennials will have 12 different jobs during their working life*, so it can be hard to keep track of all your old workplace pensions. The good news is the free Moneybox Pension Provider Search Tool can help you track down your old workplace pension providers to give you better visibility over where your pension savings are. Once you've tracked your old pension pots, when deciding whether to transfer your pension, it’s important to compare the charges, investment options and benefits between Moneybox and your old provider.
*GOV.UK Small Pots Working Group Report Dec 2020 p. 24, paragraph 5
Make The Most Of Any Free Money Available
If you currently have a workplace pension, it’s important to find out if your employer offers more than the minimum 3% contribution and, if so, how to maximise employer contributions. While this might mean you have to slightly increase your own monthly pension contributions, the additional top-up to your pension could make a big difference over time. The sooner you do this, the longer your investment will have to grow. Also, don't forget you don't pay tax on the contributions you make into a pension. If you pay tax at the higher rate, you might need to check with your pension provider in case you need to contact HMRC to claim any additional tax relief.
Clarify Your State Pension Entitlement
Close to 70% of all those surveyed by Moneybox had no idea how much they were on track to receive from their state pension. If this sounds like you, don't worry, it’s easier than you think. Just sign up or log into your personal tax account on the HMRC website to find out how much you’re due to receive. Remember, this depends on your National Insurance contributions and how many years you have been working, so it could be different for everyone.
Start Now To Enjoy The Benefits Of Compounding
The earlier you start saving and investing for your future, the better. Why? Because of compound interest: £100 a month invested from the age of 25 could be worth £130k+* by the time you retire. If you were to invest £200 a month from the age of 45, you might have £76k by retirement, assuming the same rate of return. No matter how much you can afford now, thinking about the possible returns on your investments will really help when weighing up shorter term goals versus longer term financial planning.
*Assumed annual investment growth of 5% and annual combined fees of 0.6%. Projections do not guarantee future performance
You can use Moneybox’s brand-new pension calculator tool here.
Visit MoneyboxApp.com for more information or to download the app.
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