When you retire, you cannot depend solely on the State Pension to enjoy a comfortable standard of living. If you rely on the £113.10 a week the State Pension provides currently, you are looking forward to working until you die. It’s important to build up your retirement savings throughout your working life, and the earlier you start, the easier it will be.
Standard Life figures reveal a person who starts saving £149 a month at the age of 30 will get a pension of £10,000 a year when they reach the age of 68. The same person, if they start saving at 40, will need to find an additional £290 a month for a similar retirement income.
Here are some tips to help you save money for a financially happy retirement.
Your workplace pension is an excellent way to save money for retirement. It is tax efficient, and also ensures your employer contributes a certain amount to the fund. Most workplaces pay anywhere from 3% to 10% of an employee’s annual salary. Aim to add to this amount to the tune of 15% of your salary.
If you are self-employed, you can make monthly payments to a pension provider who will invest this money to make it grow. Personal pension schemes let you save more and also give you control over where your money is invested. Shop around and compare the charges and investment performance.
A cash ISA refers to a savings account where the interest up to a certain limit annually is not taxable. If you are a basic rate taxpayer, it can boost your returns by 20%, and 40% if you’re a higher rate taxpayer. You don’t pay capital gains tax and income tax for returns from your shares and stocks. ISAs allow you easy access to your money and are usually more flexible than pension schemes, making them a popular choice with people looking to save for retirement.