Saving money for retirement may not be a priority right now – but a little planning ahead is something your future will really thank you for
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Retirement planning may not be a priority right now, but a little planning ahead could save you tens of thousands of pounds by age 55
And it couldn’t be easier, with auto enrollment, which means most workers over 22 now automatically save for retirement before their pay even hits their bank account.
But what are the secrets to a ‘good’ pension and how can you prepare early without sacrificing childcare, home ownership and other life priorities?
“On average, people in the UK live to age 85, but we typically work for around 45 years,” Martin Lewis explained on Thursday night’s ITV Money Show.
“In the last 20 years of your life you are retired and you are not working – this is when your pension kicks in
“There are two types – the public pension which gives you a minimum standard of living when you stop working It is paid weekly by the government”
At the moment the state pension is £ 17520 per week, although this will almost certainly change by the time you retire
The public pension increases each year according to the highest rate of inflation, average earnings and 25% This is known as the Triple Lock
“Then there are the private pensions that you save for yourself or through your employer (called self-enrollment)”
Private company pensions automatically take effect when you earn over £ 10,000 and are 22 years of age or older
“This means that if you are an employee you almost automatically contribute to a pension The total amount you have to pay is 8% of your salary – 3% of that amount must come from your employer,” said Martin
“The average worker pays 20% tax Therefore, for every £ 100 you earn, you take home £ 80.However, with the pension contributions you get the full amount which means you get a small pay raise by putting in some money. money aside every month, ”Martin added
“This money is then invested in the stock market, pension fund or alternative investment during your working life The earlier you start, the bigger it can grow – but you can’t touch it until you are 55 years “
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Martin explains that the rule of thumb is to aim for about two-thirds of your final salary each year after you retire.
“To do this, you need to take the age at which you start contributing, half, add a percent sign and contribute as much each year for the rest of your life”
For example, if you start contributing at the age of 30, you will have to pay 15% per year for the rest of your career
“But of course, the sooner you start contributing to your pension, the less you will have to part with your salary
“Even just £ 20 or £ 30 a month will be stacked over the years to give you a much better savings pot at the age of 55”
Anyone looking for further advice on pensions can contact the government’s Pensions Advisory Service free of charge
Remember that pension cold calls are illegal If you receive an unexpected call, email, or message from someone offering retirement assistance, report it to Action Fraud
Martin Lewis, Pension, savings, finance
Ebene News – GB – Martin Lewis on the exact amount you should pay into your pension per year