Many young people don’t think about their retirement. Even people reaching that inevitable age can bury their heads in the sand about building a pension pot; not wanting to face the truth that they are growing older.
This way of viewing retirement is understandable however the sooner you begin saving, the bigger the pot you will be able to build – something your future self will thank you for.
If you are unsure where to begin here are five pension mistakes you should avoid if you wish to maintain a similar standard of living in retirement to the one you have currently enjoy.
1. Not Having a Pension
The basic state pension will change to a flat rate of £155.65 per week from April this year (for people who have paid 35 years of NI). This equates to below £10,000 per annum. For many people this is a huge cut in their salary and not enough to maintain a reasonable standard of living.
You should also consider the fact that the pension age is rising over the next few years, so those wishing to retire in their early 60s will need to have other resources to live on until their state pension kicks in.
2. Delaying Saving
The value of your pension pot at retirement is based on the amount you put in and the length of time it is invested.
Whilst diverting your money into savings early on in your career may seem unfavorable when you are young, your older self will greatly appreciate it.
3. Not Understanding Your Options
There are a number of ways to save for retirement. You might be best suited to an ISA, whilst others may benefit more from a SIPP. What is best for you may not be the same as what is best for your friends or other members of your family. Understanding the difference and finding the option that suits you best is crucial for your pension pot to grow the way you want it to.
4. Failing to Review Your Pension Regularly
Do you know how much your pension pot is worth? Or which funds you have and their associated risk? If you currently have a financial or pension adviser, you may benefit from switching.
5. Not Seeking Pension Advice
The government launched a free service, Pension Wise, to help you understand what you can do with your pension pot money which people had found the website helpful to various degrees. It is important to note that the service offers guidance on what individuals can do, but not necessarily what they should do.
For detailed, individual advice on pensions it is worthwhile researching financial advisers who will be able to provide you with more specific advice on what you should do given your circumstances and attitude to risk.
Maxim Wealth Management offer financial advice from our offices in Glasgow and London. To request a FREE consultation please call us on 0203 841 9941 (London) or 0141 764 0040 (Glasgow). Alternatively you can fill in our contact form and we will get back to you.