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Switch onto saving

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You might think this is a repeat of all of the information out there already, but understanding the importance of saving is something to learn sooner, rather than later.

The difference between starting paying in from age 25 or waiting until you are 35 could have a notable impact on your pension savings.

Yes, there are always going to be things you’d prefer to spend your money on, but starting as early as you can and staying in your workplace pension should have a significant impact on the type of retirement you’ll be able to enjoy in the future.

Bottom line, the longer you wait to contribute to your retirement savings, the more expensive it’ll be to catch up. The difference between starting paying in from age 25 or waiting until you’re 35 could have a notable impact on your pension savings.

Here are some things you could miss out on if you delay in saving:

  • Tax relief – you’ll miss out on tax relief on your pension contributions, which basically equates to ‘free money’ from the Government (depending on what your tax rate is).
  • A helping hand from your employer – however much you pay in from your own pocket, your employer will make monthly payments into your pension savings too.
  • Seeing your money grow (or not!) – your overall contribution is invested in a fund with a provider or investment company and it is designed to work for you, so it can make its own money. Remember that with any investments, your money could go down as well as up and is not always guaranteed, so take this into consideration.

You should also think about . . .

  • The money might run out sooner than you predicted (but not if you buy a guaranteed income for life!) – if you retire with a small pension pot and expect to live on a high income, or you live to a ripe old age, your money might not last.
  • The State Pension might not be enough to rely on – you will only get this if you have made the qualifying amount of National Insurance contributions. Even so, by the time you retire, it might not be enough to live on alone, so you’ll need your own pension savings to help bridge the gap.
  • You may have to retire earlier than planned – hopefully this won’t happen, but you may fall ill, or have to leave your job to care for a loved one. So it’s really important that you have enough money to survive on if this happens.

It’s a tough message to take in, but saving a little bit each month counts. Good luck!

Taking care of the grandkids and your State Pension

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The school term is well underway, those new uniforms are starting to fit a bit better and everyone is getting settled into a routine. Working parents will also be weaving together a complicated web of formal childcare combined with help from friends and family to cover the school run and after-school care. Pension planning falls off everyone’s priority list, as school costs and practicalities need immediate attention. However, there is a little-known National Insurance provision that could offer a bit of help to some of the unpaid army of grandparents, aunties and uncles helping out with childcare at any time of the year. And what better time to look into it than today, National Grandparents’ Day.

Entitlement to the State Pension is linked to an individual’s National Insurance record over their working-age lifetime. Employees and self-employed workers pay National Insurance contributions from their earnings. But for people claiming benefits due to illness or unemployment, National Insurance credits are instead available to maintain entitlement to the State Pension.

Many people have an incomplete National Insurance record for myriad reasons: gaps in paid employment, periods of earning below National Insurance thresholds, time spent living abroad, or early retirement or redundancy. An individual with an incomplete National Insurance record can pay voluntary National Insurance contributions in cash, buying their entitlement to a full State Pension with top-up payments before they reach State Pension age.

However, for some grandparents (and other family members who provide childcare) there may be another option. Formally known as the Specified Adult Childcare Credit, these National Insurance credits are transferrable from a main parent or carer to a grandparent or other family member who provides some childcare for a child under 12.

Child Benefit is available to anyone responsible for a child under 16 (or 20 if in education or training) and includes National Insurance credits for the parent or carer. It is these credits that may be available to transfer, as long as the original recipient doesn’t need them. In practice, childcare is often necessary because a main parent or carer is at work, and so is already making National Insurance contributions from their own earnings. This means that the main carer does not actually need the National Insurance credit that comes with Child Benefit, and so it can be transferred to someone else who does need it.

The National Insurance credit can be claimed by a wide variety of family members or their partners. It’s available for any week or part week of childcare, and for any number of weeks in a year. Applications can be back-dated to 2011, plugging a sizeable gap that might otherwise cost hundreds or even thousands of pounds in up-front voluntary contributions.

For anyone considering voluntary cash payments to plug gaps in an incomplete National Insurance record, completing a very simple form might provide a no-cost option to build a full State Pension entitlement.

The factsheet and form are available from the Department for Work and Pensions website, which also details the helpline number for questions about your own circumstances.

Looking after your heart and your pension

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With the State Pension Age increasing from 66 to 67 between 2026 and 2028, there is more need than ever to consider how we care for our hearts as well as our pensions.

According to Heart UK (A UK based charity, giving expert support and education in high cholesterol and heart decease) Coronary Heart Disease (CHD) is the single most common cause of death before age 65, accounting for 16% of male and 10% of female deaths. Statistics suggest that, on average, someone in the UK will have a heart attack every seven minutes.

Advances in modern medicine and greater access to information around health, has seen a steady rise in our life expectancy, but this places a greater responsibility on us to make sure we are looking after ourselves.  So, how can we look after our hearts to keep them ticking long into retirement?

Eat healthy

Eating a varied diet of healthy foods can help you maintain your weight, blood pressure and cholesterol as stated by the British Heart Foundation, and will contribute to your overall heart health. Reducing salt, eating unsaturated fats (such as avocados, nuts and olive oil) and limiting your alcohol intake, are also some of the ways you can adopt a more heart health conscious lifestyle.

Get active

Regular, moderate physical activity is another key way to help keep your heart happy.  Maintaining your weight and leading a more active lifestyle can improve not only your physical wellbeing, but your mental wellbeing too. Try going for a short walk at lunch to break up your day. Statistics (from the NHS) show that regular gentle exercise can reduce your risk of major illnesses, such as heart disease, stroke, type 2 diabetes and cancer by up to 50% and lower your risk of early death by up to 30%.

Stop Smoking

If you’re a smoker, the single best thing you can do for your heart health is to quit. Not only will this impact your overall health, but it could also have a positive impact on your bank balance too! You could invest any money you save on cigarettes into your pension and may even have a few more years to enjoy that longed-for retirement . . .

Manage stress

Easier said than done. When work pressures are mounting and family life seems overwhelming, stress can build up unconsciously and cause your blood pressure to soar. There is plenty of help to be found, from professional medical advice to wellbeing apps, but managing stress can sometimes be as simple as taking a break in the middle of your day to relax or talking your problems through with a friend. Good nutrition and exercise can also impact your stress levels, so getting a good balance between the two can decrease stress and contribute to a healthy, happy heart.

These are just some of the ways you can be more mindful of your heart health before you retire. It’s never too late, and it’s certainly never too early, to start taking your health and your pension seriously.

Gathering your pensions in

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If you’ve worked at different places in the past, it’s likely that you’ve built up some workplace pension entitlement while you were there. Have you remembered them all and do you look after them? Or would it be easier and better for you to pull them all together and put them all in the same place?

Of course, as with most things, there are some pros and cons of doing this:

The possible benefits:

Ease of access: having all of your pensions in one place can make it easier to keep track of your retirement savings and cuts down on the paperwork and log on details.

Easier to plan: a combined view should make the picture of your retirement savings clearer and make it easier to plan how you’ll use your retirement account when you come to retire.

Save money: it may be that you can take advantage of lower fees, as some older policies may have high fees in comparison to today’s plans.

More investment choice: you might want to invest in a wider range of funds than you have with your older plans; ones that offer you more variety or suit your approach to risk better.

Potential for better investment returns: we all want to boost our retirement savings and maybe you feel you can get better investment returns elsewhere or that your savings would be better managed by moving them. Remember though, returns are never guaranteed, and past performance isn’t necessarily indicative of future results.

Potentially more options: your previous plans might not give you access to all of the current retirement options, such as flexible withdrawals. So moving these into a current retirement account would open up your choices.

What to look out for:

All ‘eggs in one basket’: with all of the money in the same place, you may not have the same spread of risk or variety as keeping them all separate. This might be an issue if the funds don’t perform well, or something happens to the provider itself.

Exit fees: be careful, as some providers may impose an exit penalty. So make sure you find out if there is one and how much it will cost you to move the money.

Loss of guarantees: some old plans have built-in guarantees around annuity rates, which might be important to you if you plan to buy an annuity when you retire. These will be lost if you transfer them to another plan.

Higher fees: the plan you move to might actually have higher charges, but you may be happy to accept these based on other factors, such as hope of a better return or more choice and flexibility on offer.

Time it may take to transfer: your money will be dis-invested when you decide to transfer, and may not reach the new plan to be re-invested for a while. This means that there is the potential you could lose out on any investment gains in this interim period

If you’re not sure what to do, it’s a good idea to get financial advice (there will be a cost for this). You’ll need to do this anyway if you’re thinking of moving from a defined benefit (final salary) scheme with a transfer value over £30,000, as there are then even more things to think about, such as giving up a guaranteed income and future increases, as well as certain death and dependant benefits.

People like you: 50+

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Making sure you’re prepared for when you stop working doesn’t have to be a chore and you’re not on your own! There are people just like you out there and we’re sharing their stories so you can benefit from their experiences.

Meet 64 year old Brian…

What type of retirement are you hoping for Brian?

With so many decisions to make around retirement I have had to think long and hard about what I want to do. Luckily my health is good, I’m 64 and the time feels right to give up work and spend more time with the family and looking after our first grandchild who is growing up fast. After all, life is for living.

How do you plan to access your pension savings – a cash lump sum, a guaranteed income for life, or as a series of cash withdrawals?

I might even delay taking my State Pension straight away, so that I can benefit from the increase later on.

Whilst guaranteed incomes have had their fair share of bad press, I want to secure an income for life, so we have enough to pay our monthly bills. I know there are various options around the type of income for life I can buy, so I’ll do my research and choose carefully because I won’t be able to change it later on. I will definitely shop around for quotes from a number of providers too and go this route. I have worked hard all my life and don’t want to go into retirement worrying about money. With my wife thinking along these lines too, we should be able to enjoy a reasonable lifestyle.

Will you also rely on the State Pension to help with your living costs?

No, I’m hoping to save some of my State Pension for a rainy day or a holiday so that we can enjoy the retirement we always dreamed of! I might even delay taking my State Pension straight away, so that I can benefit from the increase later on.

4me has a library of information, short videos and tools to help you with your savings and retirement planning – find out more.

People like you: 18-29

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Do you sometimes feel like getting your head around financial planning and saving for the future is a bit of a challenge? Well, you’re not on your own! There are people just like you out there and we’re sharing their stories so you can benefit from their experiences.

Meet 21 year old Daniel…

Tell us about yourself Daniel

After the first year of University, I realised it wasn’t right for me so I left. I am now in my last year as an apprentice engineer, with a large company, learning on the job and enjoying the workplace environment. Luckily, I am still able to live at home so my monthly expenses are low.

Do you know if you’ve been enrolled into a company pension scheme yet?

My income is below the salary threshold, I haven’t been auto-enrolled in the company pension scheme just yet. But I recently attended a benefits’ seminar and now understand more about making contributions to a pension, the gain in tax relief and how much the company will pay in on my behalf. So, when I finish my training and with an increase in my pay, I can start making contributions to my pension.

Did you find it useful?

If I change jobs in the future, my pension contributions can be moved to a future employer’s pension or I can leave them where they are; either way, they will be a good start for saving towards my retirement.

What do you think you will do next?

Even though I have to wait to earn more in order to be auto-enrolled, I think I will start a general savings account with my bank anyway to help me with those rainy days I expect I will have in the future!

To find out more about auto-enrolment, visit: www.gov.uk/workplace-pensions

People like you: 50+

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Making sure you’re prepared for when you stop working doesn’t have to be a chore and you’re not on your own! There are people just like you out there and we’re sharing their stories so you can benefit from their experiences.

Meet 55 year old Catherine…

Have you started making plans for when you stop working yet?

Having just celebrated my birthday, at 55 I am now thinking about how and when to take my pension. It’s a modest amount as I have had time away from work bringing up the family and then working part-time when I returned to work. I am pleased that I did pay in to a pension and will have something to add towards my State Pension.

How has the introduction of more flexibility around taking your pension affected you?

As the pension rules have changed, I know I am able to take some cash as a lump sum now and still continue to pay in to my pension. This cash lump sum could pay off some of our mortgage which will save money overall. If possible I want to avoid paying any additional tax, my husband believes we can take the cash in stages but is unsure of the details.

Did you know you can get free and impartial help from Pension Wise from age 55?

Yes, and before I make any decisions, I’ve made an appointment to speak to an adviser from Pension Wise to help me understand what I can do with my pension savings. I will then feel more confident in my choices.

In any event, I will probably work for a couple more years, as it will allow me to continue paying into my pension and I will still be under 60 when I retire, which will coincide with my husband’s retirement plans too.

Head over to Pension Wise if you’re 55 and over and need some help with making decisions about your retirement.

People like you: 30-49

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You’re not on your own if it feels like planning and saving for the future is a bit of a challenge! There are people just like you out there and we’re sharing their stories so you can benefit from their experiences.

Meet 41 year old Marcus…

We’re sorry to hear you’ve separated from your wife…how have you been?

After the divorce from Tracey my life was a bit of a mess. I’ve had to review all my finances again, including my pension, as I had to agree to a pension sharing order. To be honest I have many worries about the future and I need to concentrate on starting over and buying a flat in the next five years or so.

I can add an extra lump sum into my pension through the bonus sacrifice arrangement and I won’t lose any of this money to the taxman.

How has starting over affected saving into your pension?

Inevitably my priorities have changed and I’ve looked at my pension details and discovered my company match whatever I pay in up to 10% – this feels like ‘a gift’ that I’m going to take advantage of. I only need to cut back a little each month on other spending in order to maximise what is on offer, and this will help to build up more savings in my pension.

Did you know that you can pay your bonus into your pension too?

Yes, I know will get a bonus in a few months as my employer is doing well, and they’ve been very good at letting us know about the benefits of bonus sacrifice. I can add an extra lump sum into my pension through the bonus sacrifice arrangement and I won’t lose any of this money to the taxman – it seems like a good idea! If I can do this every year, I won’t be overcommitting myself each month but can still keep my pension topped up.

To find out more about pension sharing, visit: www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/when-relationships-end/pension-sharing.

People like you: 18-29

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Do you sometimes feel like getting your head around financial planning and saving for the future is a bit of a challenge? Well, you’re not on your own! There are people just like you out there and we’re sharing their stories so you can benefit from their experiences.

Meet 23 year old Polly…

What do you do for work Polly?

I work in fashion retail. Going forward I hope to join the management training scheme to improve my career prospects within the Group.

What has been your experience so far with money and finances?

Growing up, money was tight, but my parents always worked and paid into pension schemes, so I understood from an early age the need to have money for the future.

I want to save up for my own flat, but don’t want to waste money on renting, so plan to stay home for the time being. I’ve heard about the Government introducing the LISA (Lifetime ISA) next year, so I am going to look into this as it could help me save for a deposit.

Did you know that a Lifetime ISA or LISA can also help you with your retirement saving as well?

Yes, I have but I would rather use the money being a first-time buyer. It also means I can keep this account open for when I eventually come to save for retirement.

Do you know anything about retirement?

I know that there is a pension awareness day soon at our Head Office where you can drop in and find out about auto-enrolment and the benefits of saving in a pension scheme – so I am planning to go.

For further information about the LISA visit: www.gov.uk/lifetime-isa.

Part one: planning to make your dream retirement a reality?

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It’s often difficult to imagine what the future will look like – especially when you’re young! It’s even more challenging to plan effectively for a future you can’t imagine while the immediate issues and responsibilities you face on a daily basis take up most of your time.

For some, retirement might feel like the end of an era – a time to slow down and settle for a quieter way of life but with many of us living longer, healthier lives maintaining that full and busy lifestyle when we eventually stop working is fast becoming the norm. It’s worth remembering that you will still be the same you when you retire but with the added benefit of not having to go into work every day!

So let’s think for a moment about what you really want your retirement to look like, and some of the aspects of your daily life that you may currently take for granted. What plans do you need to put in place to make your dream retirement a reality . . ?

Maintaining your current lifestyle

Do you have an active social life, enjoy dining out, weekending with friends, have hobbies and organisations that you belong to? These are the things that make you, you and likely bring you a great deal of pleasure! Having more time to spend on them once you retire is truly something to look forward to, but it’s worth remembering that you will need to factor the associated costs in when you’re working out your later life budget.

Take a look at the cost of living example below. It will give you a good idea of just how much prices have risen for some essential living costs over the decades:

         

1978

 £14,054 17p £3.60

£2,760

1998

 £73,261 71p £10.03

£12,500

2008

 £211,119 £1.04 £1.04

£15,800

2018

 £255,325 £1.19 £13.60

£21,164

Prices taken from the ‘Back in the day’ website which uses data from ONS, the AA, Nationwide Building Society and the National Archive.

Whatever retirement looks like for you personally, you can never save or plan for it too early. 4me has a wealth of interactive tools, short videos and a comprehensive library to help you with planning for the future. Find out more about how 4me can help you here.

Take the guesswork out of your pension puzzle

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Do you have a clue what you’re likely to live on when you finally decide to call time on your working life? Have you got all the pieces in place now to help pay for your future? We take a look at four ways to help take the guesswork out of the pension puzzle.

Sorting out the pieces

It’s never too early to start budgeting so that you have a clear picture of the income you’ll need, and work towards achieving it.

You are likely to have a pension associated with each job you’ve had during your working life. It can be tricky to keep up to date with all of these separate ‘pension pots’ (especially if you left the job/s many years ago) but bringing all the pieces together so you have a more complete picture, can really help with planning effectively for your later life. Why not request up to date statements from all your pension providers so that you have a realistic idea of how much you can expect when you retire? You can also track down any ‘lost’ pensions with the Pension Tracing Service.

Make sure the corners and edges are in place before filling in the middle

When you are working out how much income you will need in retirement, consider your current outgoings, and decide which you think might go up, down or stop when you retire. You may have paid off your mortgage or downsized which will reduce your monthly bills, but on the other hand you may plan to go on holiday more often, socialise with friends or spend time travelling which could cost you more.  It’s never too early to start budgeting so that you have a clear picture of the income you’ll need, and work towards achieving it.

How long is the puzzle going to take?

In general, we are all living longer, healthier lives. For some of us that might mean working for longer, either out of choice or because we need to, and for others it might mean a phased move into retirement working part-time or reduced hours. However you imagine what stopping work will look like, you should bear in mind the impact that a reduced salary or working for longer could have on your income.

Have you got enough pieces to complete it?

It’s all very well planning ahead, but what if you can already see a shortfall in your retirement expectations? There are a number of options which can help, including:

  • delaying your retirement date and continuing to pay into your pension savings for longer
  • increasing your payments by a small amount each year as soon as you can to reduce any deficit
  • lowering your expectations – accept you might have less than you’d hoped for and think about more careful budgeting
  • reviewing any other savings you have (ISAs for example) to make sure they are the best place for your long term savings

Whatever your age, and wherever you are on your savings journey, 4me has interactive tools and short informational videos to help you put the pension puzzle together. Find out more about how 4me can help you here.

 

Automatic saving for the people

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It’s been the law since 2012 that all employers must offer a workplace pension scheme and for all eligible workers to be automatically enrolled into one – you might have heard it called auto-enrolment or you may have seen the workplace pension adverts.

In the past the decision to be in a pension scheme was left entirely up to the individual, but for those choosing not to save for their futures, the problem of poverty in retirement became a serious issue. Auto-enrolment was introduced as a solution to help working people to save for retirement.

Auto-enrolment was introduced as a solution to help working people to save for retirement.

As a reminder to be auto-enrolled you need to:

  • work in the UK
  • not already be in a workplace pension scheme
  • be at least 22 years old, but under State Pension Age
  • earn more than £10,000 a year (tax year 2017/18)

Is this you? Yes? If so, then you’ll be in your workplace pension and should have had some information about it. If not, contact your Human Resources (HR) department for further guidance.

Important information! If you are lucky enough to have been auto-enrolled by your employer contributions are set to increase from 2018 – be aware that there will be a 2% increase between 2018-19.

Here’s what will happen from 6 April 2018:

When? Employer You Total
6 April 2018 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

 

 

 

 

 

 

It’s worth remembering that these are the minimum contribution levels. You might be lucky enough to have a generous employer who will pay in more, or you could think about increasing your own contributions. Even a small increase could make all the difference.