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Pensions: Learn from others’ mistakes

Pensions: Learn from others’ mistakes

Category: Pensions

Updated: 23/05/2014
First Published: 23/05/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Everyone can learn something from listening to their elders, and when it comes to pension savings it's no different.

Not starting to save for retirement early enough is the biggest financial regret for one in five (18%) of those aged 55 and over, according to research from Standard Life, so perhaps we should all be learning a lesson and getting into the savings habit sooner.

When you are in the throes of your youth it can be all too easy to live for the day, but already people are thinking they should be saving more with 12% of those under 25 wishing they had spent less on nights out and saved more in general.

Then you buy your own home, possibly start a family, and the expenses start racking up. This is where the opportunity of 'buy today and pay tomorrow' may creep in and running up debt on credit and store cards is the biggest regret for all other generations.

Julie Hutchison, of Standard Life, comments:

"This new research should come as a wake-up call to the many people who aren't saving enough for when they retire. The value in starting to save early is clear in terms of increased potential for growth.

"We also know from previous research that parents often find they need to de-prioritise their own saving when they are older, to help support their adult children with large expenditure such as university fees and deposits for their first homes. So trying to close up a savings gap later on in life can be really tricky.

"We should all learn from the experience of baby boomers and start saving as soon as we're able to, so we don't share the same regret when we're older."

It may seem a tireless task to find those few extra pounds to put into a pension, but if you take a look at your lifestyle there are sure to be areas in which you can cut back. Such small changes as packing your lunch up everyday instead of buying out, substituting that weekly night out at the cinema for a film-fest at home, or cooking a special meal instead of dining out can make all the difference, and if you put the amount saved away, you'll be surprised how quickly it will mount up.

Many more people will be auto-enrolled into workplace pension schemes this year and this money is taken out of your pay before you receive your cheque. If you combine this with the small lifestyle changes, then you'll probably hardly notice the deficit in take home pay. Workplace pensions still have an opt out clause, but think carefully before doing this as you get generous tax breaks and employer contributions, which in the most basic term constitutes as "free money" in your pot.

If, however, you are self-employed you will need to look into making your own pension arrangements to ensure you are saving enough. And there are always other options for everyone to consider – we all know the saying don't put all your eggs into one basket – so why not consider paying into an ISA too? If you choose a fixed account you can get some fairly reasonable rates, and all the interest will be tucked away from the taxman's grab.

Encouragingly, the research shows that people are turning their thoughts to saving for the future, with 10% of those questioned saying they intend to invest into their personal pension this year, while a further 20% are planning to save into a workplace pension. Those aged between 25 and 34 seem the keenest to invest for their future, with 15% planning to save more into a personal pension this year.

Starting to save as early as possible is the key, but if you haven't managed to so far, as Ms Hutchinson states, it's never too late. She continued: "Our research shows that people are becoming better at managing day to day money, but are less smart when it comes to saving for the future. If you haven't started saving towards your retirement, or if you started then stopped, the important thing is not to panic. It's a matter of taking control, working out what you can afford and getting into a habit of saving regularly.

"And if you have been saving into a pension, but don't know how much it's currently worth, then take stock to see if you are on track for your retirement aims. You might have several different pensions, which can make it tricky, so if that's the case, you could consider whether it's in your best interest to bring them together for a much clearer view of how they are doing."

What Next?

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Check out our retirement guides for more information

Find a home for your 2014-15 cash ISA allowance

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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