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Man in 50s

Avoid pensioner poverty - start saving now

What are your plans in retirement? Whether you’re 25 or 55, you should be thinking about how you’re going to finance the lifestyle you want in retirement now. Most people will qualify for a State Pension from the government but this could be worth less than you think.

According to a survey out today, more than one in seven (15%) of people retiring this year are relying on the State Pension alone.

Almost two in five (37 per cent) believe the state pension is worth more than its current value and a further eight per cent admit to having no idea what it is worth, according to the findings by financial services group Prudential.

Pensions can seem complicated and it can be tempting to bury your head in the sand. But taking the time to think about your options now can make a massive difference to how much you retire on.

Here are our three reasons to think about your retirement income now.

1. State Pension may be less than you think

A single pensioner who qualifies for the full State Pension can currently expect to get £115.95 a week.

This represents an annual income of just over £6,000.

However not everyone will qualify for the full State Pension. This is because the amount you receive depends on the National Insurance payments you have paid (or are credited with) throughout your working life.

2. Contributing into a pension may be easier than you think

Are you currently employed? Then you will probably have access to your employer’s pension scheme.

This is likely to be a defined contribution pension scheme. These schemes build up a sum of money using your personal contributions, your employer's contributions (if applicable) and contributions from the government in the form of tax relief.

To increase the number of people saving into a pension, the government introduced auto-enrolment for workplace pensions, which is currently being rolled out in the UK and due to be completed in 2017.

Currently the total minimum contribution is set at 2% of earnings (0.8% from you, 1% from your employer, and 0.2% as tax relief).

3. The earlier you think about it, the more you’ll get!

The sooner you contribute into a pension, the longer your money will have to grow. This can make a big difference to how much your pension could be worth.

According to Legal and General, to get an annual pension income of £5,000 when you’re 65, you will need to contribute around £208 a month when you’re 25. However, you would need to contribute £840 when you’re 55 to get the same income amount.

Our Pensions Calculator gives you an estimate of what to expect when you retire. The tool was used more than 500,000 times last year. What could it tell you about your retirement?

 

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