It’s good to talk about your options
Put simply, retirement planning is about how you look at your future, but more than a million Britons are facing a ‘mid-life savings crisis’ as they near the age of 40 with no retirement savings, according to research from Zurich. A third (33%) of British adults aged 35 to 39 – equivalent to an estimated 1.31 million people – say they have no money saved into a pension, despite approaching the mid-point of their working lives.
Not saving into a pension
Among ‘millennials’ (those born between 1980 and 1999), the picture is equally bleak with almost two in five (37%) adults aged 25 to 34 – equating to an estimated 3.2 million people – not saving into a pension.
The findings highlight how financial pressures could be forcing some Britons to start saving later, while others are struggling to save at all. Rising rents and house prices, combined with years of low wage growth, have made it harder than ever for people to save.
Inadequate income in retirement
With the cost of living rising, some people appear to be putting off saving into a pension, or not saving at all. This is leaving a third of Britons in their late 30s facing a mid-life savings crisis. By delaying saving into a pension, a substantial number of Britons could end up with an inadequate income in retirement.
Younger generations who delay saving may have to retire later. Britons reaching the age of 40 with no pension savings could be forced to work much longer to achieve a secure retirement. Even those nearing their 30s without a pension should not assume they can make up lost ground at a later age, no matter how far off retirement may seem.
Wiping off tens of thousands of pounds
Delaying saving for a few years can wipe tens of thousands of pounds off the future value of your pot. The earlier you start investing into a pension, the more your savings will benefit from the compounded benefit of growth on growth.
It is important for savers to maximise their employer contributions and take advantage of pension tax relief. The good news is that your employer and the Government can help to boost your savings.
Matching your contributions
If you save into a workplace scheme, it is likely that your employer will pay into your pot – with many matching your contribution. It makes sense to take maximum advantage of this. Any money you save is also boosted further by a government top-up in the form of tax relief.
Under auto enrolment, many employers are obliged to pay into a workplace pension for their employees. If you decide to opt out of the scheme, you will miss out on employer contributions and tax relief, which is free money by any other name.
Tips to boost your pension
Regardless of whether or not you have started to save, these four tips can help get your pension on track:
1. Take advantage of tax relief
Any money you pay into your pension receives a rebate from the Government at the same rate as you pay Income Tax – 20%, 40% or 45%. This means it costs a basic rate taxpayer 80p to put £1 into their pension, a higher rate taxpayer 60p and a top rate taxpayer 55p.
The rate of tax relief matches the amount of income in that tax band, so a higher rate taxpayer with £3,000 of income in the higher rate band will only get 40% tax relief on £3,000 of gross contributions (and 20% on any balance).
2. Maximise employer contributions
Make the most of your workplace pension scheme. Some employers will match your pension contribution, which can turbo-charge your savings. For example, if you increase your current contribution by 3%, your employer may pay in an extra 3% too.
3. Taking risk can work to your benefit in the long term
Even if you’re starting to save at 40, it’s likely you’ll have another 25 years before retirement. This means it’s not too late to take a long-term view and invest in higher risk funds at the outset with potentially bigger returns. By investing for the long term, you are better positioned to weather the ups and downs of the stock market.
4. Plan ahead
Know how much you need to invest each month to achieve your ideal retirement, and don’t forget to factor in inflation. Everyone’s different. And it’s likely the things you spend your money on now will change when you stop working.
Make sure you have sufficient money
A critical aspect of retirement planning is how you structure your financial affairs to make sure you will have sufficient money if and when you stop working. If you would like to review your current retirement plans, please contact The Clifton Business Consultancy on 0117 959 1022 or email firstname.lastname@example.org – we look forward to hearing from you.
Total sample size was 1,018 adults aged 18 to 39.
Fieldwork was undertaken from 10–13 June 2016. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18 to 39).
 Office for National Statistics data 2015 (published June 2016) shows there are 3,961,730 GB adults aged 35 to 39. 33.08% of 3,961,730 is 1,310,540.
 Office for National Statistics data 2015 (published June 2016) shows there are 8,574,802 GB adults aged 25 to 34. 37.33% of 8,574,802 is 3,200,974.
A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.
LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION MAY BE SUBJECT TO CHANGE, AND THEIR VALUE DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF THE INVESTOR.