Research by tax refund experts, RIFT Tax Refunds, reveals that half of us are failing to plan for the future by not paying into a pension pot, while just 29% of people are saving for an early retirement.
RIFT Tax Refunds found that only 50% of people said they currently pay into a pension pot, leaving 50% who do not. Of those who do, just over half say that this is done via a workplace pension scheme.
Strikingly, nearly half aren’t aware of how much they contribute each month, with 53% also in the dark about how much their employer contributes.
Only 9% of people say they also pay into an additional pension scheme, and only 29% say they ever consider saving additional money to fund their retirement.
The fact that so many people are relying on their workplace pension to fund their life after work is striking, especially when you consider that, according to The World Economic Forum, the average person is expected to outlive their pension pot by ten years.
This means that most people are at risk of running out of money while they still have plenty of life left to live. It is, therefore, vital that more people start saving additional money each month to ensure that they can live a good quality of life well into their later years.
Today, of course, we are experiencing a severe spike in the cost of living, so saving for retirement is likely a long way from people’s minds, but for those who can afford it, it’s vital to start putting away at least a little bit each month as soon as possible.
Here are a few of the reasons why.
1 – Live life to the max
We’re living healthy, active lives for longer than ever before. 60 is the new 50. And 70 is the new 60. When you reach retirement, there is so much for you to be looking forward to and having some money saved will make it much more fun. Instead of simply getting by on your pension, you’ll have the additional funds to do all the things you’ve never had time to do, whether it’s travelling, buying a season ticket for your favourite football team, or simply spoiling your grandkids rotten.
2 – Time flies
The longer you wait to start saving for retirement, the harder it will be. Even just waiting ten years changes everything. A 25-year-old who earns a salary of £29K and wants to save £300K for retirement needs to save about £380/month. By 35, this monthly saving will need to be £540/month. These are rough numbers but the lesson is clear, ten years can fly by and, in terms of saving, it makes all the difference in the world.
3 – Retire sooner
This one is simple – the more money you have saved up, the earlier you can retire. Instead of working into your 70s, you can be on the beach by the time you’re 60!
4 – Saved money can make more money
If you’ve got money saved up, you can invest it and watch as it makes even more money. You might buy shares, or invest in property, or simply store it in an ISA. Either way, it’s growing.
5 – Good habits last a lifetime
If you can develop good saving habits early on, it will serve you well for the rest of your life so that, when retirement does arrive, you’ll be well-practised at managing your money rather than spending everything the moment you get it.
6 – Pension benefits
You’re saved money doesn’t have to be put into a formal pension scheme, but doing so has some powerful benefits, not least when it comes to tax.
7 – Don’t get into avoidable debt
Finally, a word of warning. While saving money is always a great idea, do not do it if it means you end up in any sort of debt, such as credit card debt. Interest grows on debts far quicker than it does on savings, so always make sure your essential finances are covered today before putting money away for tomorrow.
CEO of RIFT Tax Refunds, Bradley Post, commented:
“Such is the state of the world today that saving for an early retirement feels impossible at worst and a luxury at best. But the sad truth is that workplace and state pensions are rarely enough to fund a good quality of life after decades of hard work and so saving for an early retirement is key, even if it means you can’t retire early, but have enough in the bank when you do.
We would strongly encourage anyone who can afford to save even just a small amount to start doing so now – the earlier you start, the better you’ll be in the long run.
But even those who cannot afford to be thinking that far ahead right now might still be able to make small steps in the right direction, one of which is ensuring that you are claiming all of the tax refunds that the government owes you. Even if you’re only getting back £1,000 a year, over a couple of decades, this can make a real difference when it comes to enjoying your retirement.”