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Setting goals could boost your pension pot by £30K

Setting goals could boost your pension pot by £30K

Category: Pensions
15/03/2018

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 It is now over 6 months old so the content may be out of date.

Setting goals can be the key to success in many areas of life, helping motivate you to achieve anything from career progression to building up that house deposit. Savings goals can be particularly beneficial, and if you have savings goals set for retirement, you could boost your pot by around £30,000.

That's according to a study from Zurich UK, combining research from YouGov and Mindlab, which found those who set tangible goals for retirement can be significantly better off. These needn't be specific monetary goals, either: travelling more, taking up new hobbies and being able to financially support children and grandchildren were found to all be targets that encouraged better saving, with there being a clear link between goal-setting and savings behaviour.

Indeed, those with specific goals for when they're aged 65+ are more likely to save, and as a result, put aside approximately 7.25% of their salary into a pension, compared with 5.36% among those without such goals. Based on a typical salary of £30,708 (for an employee with five-nine years' experience), a ''goalless'' saver would put away just £1,646 into their pension each year, compared with £2,226 per year for those with set goals.

This would mean a 28-year-old goalless saver could potentially have a pension pot of £87,600 at the age of 65, yet if the same employee set goals for that stage of life, they could build a pot of £118,000 – a potential increase of £30,400. This doesn't include contributions from employers, either, meaning that the difference in pension pots could be far greater.

Many goal-setters already seem to have a different mindset when it comes to saving, with 78% of those who have goals for later life already having savings and investments, compared with just 49% of those who are unsure about their targets for the future. Having current goals can also be a trigger for better money management, with just 29% of those without any current goals (such as starting a family or going travelling) having put money aside in their current account, compared with 49% of those already saving for a specific, shorter-term goal.

Then there's the finding that certain goals have a greater impact on savings behaviour than others: those with an emotional attachment to their goals are more likely to take positive action to achieve them, with saving for retirement identified as the most important savings goal, as well as being one of the most emotionally-motivated.

"What's clear is that goal-setting does increase the amount people save, and that some goals are more effective than others," said Duncan Smith, managing director of MindLab. "But it's those 'emotional' goals – saving to care for elderly relatives or for retirement – that come out as the most important from both a head and heart perspective."

Anne Torry, head of Zurich UK Life, added: "For most of us, managing our money day to day occupies most of our attention, particularly when rising inflation puts family budgets under ever greater strain. But, our research demonstrates that thinking about what you aspire to and having goals for the immediate and long term will inspire people not only to save, but save more. This is why it is so critical to take time out, and visualise your future so that you can then take action to financially prepare and realise your ambitions.

"Small steps taken early on can make a huge difference. Saving regularly into your pension or drip feeding amounts of money into the right investment can generate an income that will make your goals achievable, whether this includes travelling more or supporting loved ones."

What next?

Find out more about saving for a pension by reading our guides

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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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