When it comes to building a pension pot which can properly last you the main rule is, that the sooner you start the better. Starting your retirement pot as early as possible will give you the best chance of riding out the ups and downs of the pensions market. It will then ensure that you come out with a comfortable pension.
First steps in building your pension
One of the first things you can do is to work out how much you can comfortably afford to save without getting into financial difficulties. This should be done whether you are planning to join a workplace scheme or investing in a private pension. It’s no good committing yourself to a huge monthly contribution if you’re not sure about your job or you think you may need payment holidays. If you need a pension contribution scheme that is flexible, consider taking financial advice from a reputable source. Whether you want to keep things simple with just a workplace pension and separate savings account or you are happy to plunge into the world of stocks, shares and investments to build your pension pot there is plenty of sound advice to be had. You can find insight either on the web or via a financial advisor. Make sure to choose a source that is independent and regulated by the FCA.
As we said earlier, the sooner you start to save for your retirement the better. If you leave it until later in life to start you will need to save a larger amount to achieve a liveable pension. When you have longer to save you can take advantage of the ebbs and flows of the pensions market. You can also choose where to invest your hard-earned money and you can benefit from compounding. This means you get returns on your returns as well as on your capital payments. Compounding is especially beneficial over long periods of saving.
Work out how much you need to save in your retirement pot
It can be tricky, especially for younger people, to work out how much they’re going to need to live on after retirement. This is because there are so many unknown factors along the way which could derail well-laid plans. Be realistic about how much you can save. If your workplace has a defined contribution pension scheme this is often the best, safest and most affordable option. With one of these you could maximise your employer’s contributions by opting to increase your own payments.
If you’re saving into a private scheme there are various ways in which you could boost your pension pot. Examples include using a pay rise or unexpected windfall to fund your person. Or, consider redirecting a regular expenditure which has come to an end into your pension pot. Paying a lump sum into your pension is an easy way to boost it. Plus, the government will top it up with tax relief. For example, if you paid in an extra £1000 the government would add an extra £250 in tax relief for a basic rate taxpayer.
Put off breaking into your retirement pot
The longer you leave your pension pot untouched without breaking into it the more you’ll be left with on retirement. Keep an eye on how any investments are performing and be prepared to change them if necessary. Remember to plan for elderly care costs, which can quickly eat into even the largest pension posts. Above all, take expert advice if you’re not sure about anything.
