Don’t give up chance of ‘free money’ for your pension pot

Too many of us are not planning adequately for retirement, says Allan Gardner, financial services director at Aberdeen-based law firm Aberdein Considine

Business Editor: Erikka Askeland (01224) 343356 E-mail: pj.business@ajl.co.uk Inverness Office: Tel: (01463) 272200 To Advertise: Tel: (01224) 343159 More than a million people in the UK are facing a midlife savings crisis as they near 40 with no retirement kitty, according to research from insurance giant Zurich.

One-third (33%) of British adults aged 35 to 39 – equivalent to an estimated 1.3million people – say they have no money saved into a pension, despite them approaching the mid-point of their working lives.

Among millennials – those born between 1980 and 1999 – the picture is equally bleak, with nearly two in five (37%) adults aged 25 to 34, equating to an estimated 3.2million people, not saving into a pension.

The findings highlight how financial pressures could be forcing some people to start saving later, while others are struggling to save at all. Rising rents and house prices, combined with years of low wage growth, have made it harder than ever for people to save. With the cost of living rising, some people appear to be putting off contributing to a pension, or putting nothing away at all. This is leaving a third of Britons in their late 30s facing a mid-life savings crisis. By delaying saving into a pension, you risk ending up with an inadequate income in retirement. Younger generations who delay saving may have to retire later – those reaching the age of 40 with no pension savings could be forced to work much longer to achieve a secure retirement. Even those nearing their 30s without a pension should not assume they can make up lost ground at a later age, no matter how far of retirement may seem. Delaying saving for a few years can wipe tens of thousands of pounds off the future value of your pension pot.

The earlier you start investing in it, the more your savings will benefit from the compound benefit of growth-on-growth.

It is important for savers to maximise their employer contributions and take advantage of pension tax relief.

The good news is that your employer and the UK Government can help to boost your savings.

If you save into a workplace scheme, it is likely your employer will pay into your pot – possibly matching your contribution. It makes sense to take maximum advantage of this.

Any money you save is also boosted further by a government top-up in the form of tax relief.

Under auto enrolment, many employers are obliged to pay into a workplace pension for their employees. If you choose to opt out of the scheme, you will miss out on employer contributions and tax relief which is free money by any other name.

A critical aspect of retirement planning is how you structure your financial affairs to make sure you have enough money if and when you stop working.

BANK ON IT: The earlier you start to invest, the more your savings will benefit from compound interest

Allan Gardner: advice