We’ve all been there; the gym membership we’ve never used, the language course we’ve never finished, and the chocolate ban that’s broken after just a few weeks. On second thoughts, make that hours. Would making a New Year’s Resolution for 2016 on improving your pension savings be any different? Potentially not.
However, recent research commissioned by Royal London for its new Pensions Through The Ages Report highlighted that 75% of today’s retirees aged 65-75 had a bucket list of things that they wanted to do now they were retired.
Retirees’ Bucket Lists include:
- Travelling was the most popular option; over two thirds (67%) of retirees had travel on their list.
- Half (51%) said that spending time with family and friends was on their list.
- Doing hobbies and pastimes was popular for 42% of the retirees surveyed.
- 30% wanted to be able to leave a financial legacy for their children or grandchildren.
- Just 3% of pensioners said they wanted to buy a fast car.
- 2% listed adventurous activities, such as sky diving or bungee jumping.
Encouragingly, 75% of retirees with bucket lists said they have already been able to ‘tick-off’ some of their goals. Nearly half (45%) said that they had travelled, 42% have spent time with family and friends, and over a third (36%) have been able to start or maintain a hobby or pastime.
Sadly, over a quarter (26%) simply couldn’t afford to do the things on their list.
- Over a third (36%) of today’s retirees wish they had saved for something that they cannot afford to do now they have retired.
- 21% said they wished that they had saved more to maintain their standard of living or in order to remain healthy.
- 12 % wish they had saved enough to be able to have a holiday each year.
For younger generations it’s not all good news either. The Pensions Through The Ages Report showed that only 15% of 18-40 year olds think they are saving enough to see them through retirement, so unfortunately their aspirations for later life may not live up to their dreams.
Fiona Tait, Pensions Specialist at Royal London, offers comment on why pension saving should really be a key New Year’s Resolution for people in 2016:
“Having dreams and aspirations for retirement is great but it is another thing to be able to fund those dreams. Many people find it hard to envisage how much income they will need in retirement just to maintain their current standard of living, let alone any luxuries.
Working out how to fund an income for retirement can appear complicated and people are often put off by the huge amount they need to save. But it is simple. People just need to start saving as soon as possible, set savings goals and then regularly review the progress they are making. There is considerable evidence that those who have a long term pension savings plan in place are likely to end up with higher savings. This gives them the potential to have a more comfortable retirement and so more likely to live out some of their dreams.
In 2014, those who weren’t dependent on just the state pension in retirement spent nearly twice as much on recreation and culture than retirees who were mainly dependent on the state, £149.50 compared to just £70.** Keeping a New Year’s Resolution to start or improve pension savings, doesn’t have to be difficult and what better incentive is there than the chance of a much better quality of life in the future. Perhaps pension saving is the one resolution not to be broken?”
Royal London’s top tips for a 2016 New Year’s Resolution on Pension Savings
For those without any pension savings
- Start saving now. For those who aren’t saving into a pension already, it’s that simple. The first thing to do is to check, if employed, whether it is possible to join a workplace pension scheme. This could help give pension savings a boost immediately, particularly when the employer matches contributions made.
- Establish a target retirement date as this will help to identify the time available to build up any savings.
- Be realistic about how much can be put aside each month into a pension. Don’t shy away from saving. Even a small amount, saved regularly will help to build a pension nest egg to help have a comfortable lifestyle in retirement and achieve those dreams.
For those already saving
- Find out the value of current savings and the potential income this may secure. This might sound obvious, but nearly half (42%) of pension savers aren’t sure of the value of their pension pots.
- Don’t just rely on personal contributions. An employer, if it’s a workplace pension and the government through tax relief can help boost savings. Take advantage of any matched contributions from an employer, and check that the tax office is aware of your of the tax relief due on any contributions made. More details available on HMRC website at https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
- For those approaching retirement who might be unsure of the options available to them, or for those who just want to understand their options better, consider seeking guidance or financial advice.
For more ambitious pension investors
- Taking independent financial advice should be considered. An adviser will be able to help explain the investment options available and the most tax efficient way to achieve your savings goals. Also research shows that individuals who take financial advice tend to save more and have larger pension pots in retirement.
- Get jargon-busting! Researching some of the financial jargon and obscure acronyms will help to make pensions easier to understand. For example, the Money Advice Service, MAS, website has a jargon buster,https://www.moneyadviceservice.org.uk/en/articles/pensions-and-retirement-jargon-buster.
- Check where pension funds are actually invested. It is important that investments match a saver’s attitude to risk, which can change over time. Attitudes towards certain sectors and types of assets should be considered. For example, some people prefer to focus on sustainable investments or less risky assets or markets.
General pension savings resolutions
- Be ambitious about the income needed in retirement to enjoy life including any special treats, such as regular holidays.
- Be mindful of when and the level of the state pension that may be received. This will enable any potential shortfall in income to be covered by additional pension savings, if necessary.
- Review pension savings at least once a year and particularly if financial circumstances change such as a change of job or a pay rise.