State pension: Expert on difference between ‘old’ and ‘new’
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Experts estimate roughly £30,000 per year is needed for a comfortable retirement, and for many this will translate to over £600,000 in retirement savings needed when they exit the work force. It may seem to be an overwhelming estimate, and with inflation it will likely grow much higher in coming years, but Romi Savova shares why prioritising one’s pension now can make retirement savings far easier in the future.
Ms Savova, the founder and CEO of online pension provider PensionBee, shared her tips to kickstart the new year.
She noted that many may have ‘Organise finances’ on their list of resolutions this January, but few consider their pensions as part of their resolutions.
Ms Savova said: “By not prioritising their pension next year, savers could be putting themselves at serious risk of missing out on their retirement ambitions and facing a pension shortfall in later life.
“The retirement landscape proves to be increasingly challenging for future retirees – with National Insurance contributions rising for those still in work, an increasing state pension age, and inflation predicted to peak at four to five percent before the end of the year. In this difficult climate, it’s never been more important to plan ahead for retirement and a little can certainly go a long way in terms of pension savings.”
Ms Savova shared that rather than simply trying to add the odd extra £10 or £20 into one’s savings, consumers should increase their contribution levels by just one or two percent of their salary.
She continued: “In time, this could have a significant impact on their pension pot, thanks to compound interest. In addition, the earlier a saver starts making additional contributions to their pension, the longer these have to grow in 2022 and beyond.”
Ms Savova shared her top six tips for tracking and topping up pension savings in 2022.
Staying dedicated to one’s savings goals can be difficult when the money is just sitting in their bank account waiting to be used.
Ms Savova suggested consumers should use digital finance apps such as Snoop to properly budget, view their spending more clearly and see what extra income or unnecessary expenses could rather go towards pension pots.
Switch energy providers
In the wake of the energy crisis and with so many companies going insolvent, many are wary of the situation with their energy provider.
However, as it is one of the biggest monthly household bills in the UK, Ms Savova noted that consumers could be far better off if they simply do some shopping around to ensure they are getting the best deals.
“Switching energy providers can save households as much as £180 to £259 a year, and using energy comparison sites such as uSwitch can help you discover how much you could be saving into your pension instead,” she added.
Give up the habit
In the spirit of resolutions, Britons could see themselves financially better off without even intending to do so.
Giving up expensive non-necessities like gambling, smoking or drinking can save households hundreds every month.
Take occasions into account
Months like December can be overly expensive whereas consumers are less likely to spend during months like September with no major holidays or discount seasons like Black Friday or January sales.
Noting these occasions in advance can help individuals plan for high-spending season by stocking up in high-discount season.
Ms Savova explained: “By taking advantage of these periods to buy for special occasions in advance, you can avoid feeling overly stretched in your high spend months.”
Cancel old subscriptions
While it may be a mere few pounds here and there every month, subscriptions can total in hundreds of unnecessary spending every year that could be going towards one’s pension savings instead.
Ms Savova shared: “Recent research has found that 21 percent of people in the UK are paying £265 each year for subscriptions they no longer use. These unwanted subscriptions, such as gym memberships and online streaming services, could be putting unwarranted pressure on household finances.”
Pension investments need to be checked up on, regardless of how long term, passive or risk-free they may be.
Additionally, investors who put their money towards their beliefs are advised to check where their money actually is to ensure the companies they invest in align with their values.
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