It’s never too early to start planning your retirement. Of course, you may not want to retire in Bora Bora. (For what it’s worth, I do). One in ten private sector workers in Britain would like to be able to retire at 55, but 24 percent believe they will have to wait until they are at least 70, and nearly half of public sector workers want to hang up their boots at 60 or under. Yet 37 percent are not actively preparing to make this a reality, according to figures released to The Guardian. Financial services company Hargreaves Lansdown believes it is possible to retire this early; here are their tips to help you make your retirement dream a reality.
Pay into a personal pension
If you pay into a personal pension, the taxman will give you a proportion of the £35 billion allocated to pension savers. For example, if you contribute £1,000 to your pension, the taxman will add £250 to give you £1,250 – pretty easy way to get a pay rise, right? And if you pay the higher rate of tax (40 or 45%), you get even more money. There’s more good news: you can also claim back extra money through your tax return. Two words: no brainer.
Start your pension as early as possible
Nearly 40 percent of Britons don’t have a pension, so it’s quite possible you fall into that category. The reality is, if you want to enjoy a comfortable retirement – be that in Bora Bora or Blackpool – a pension is essential.
To establish how much you should be saving, Hargreaves Lansdown suggests you should divide your age when you begin to save money by two and use this figure as the percentage of your earnings you should save. So, if you are 28, aim to save 14 percent of your earnings. However, to retire at 55 you will need to save more than this. It’s a good idea to use a pension calculator to help you work out how much you’ll need.
Opt-in to your company’s pension
Does your company offer a pension? If so, it’s a good idea to opt-in to it. Consider your company’s offer of a pension as a “helping hand”, because you will need to top it up if you are to retire at 55. By 2018, all employers will have to offer a pension scheme to their employees and contribute to it, too; you can find out more here.
If you have a pension, keep an eye on the returns you’re getting
Small differences in the performance of funds can add up over time, so it’s important to ensure your pension is being invested for maximum returns.
Aim to increase your contributions regularly
If you’re 30 and are contributing £150 every month to your pension, and you increase this amount the following year by 5 percent (an additional £7.50 per month – less than you probably pay for a meal out), the extra contribution could amount to up to a staggering additional £190,642 in your pension pot by the time you reach 65, according to Hargreaves Lansdown (assuming basic tax relief and a consistent growth performance of 4 percent net of charges).
Hunt down old pensions
If you’ve changed jobs more than a few times and have joined pension schemes in each of those jobs, now is the time to track down those pensions – it’s your money! Use the free Pension Tracing Service if you need some help with this.
If you truly want to retire comfortably at 55, it’s important to act now, whilst time is on your side. Planning is key; use these tips from Hargeaves Lansdown to help you get started or click on some of the links below for further information about pension planning.