Nowadays, we’re more aware of our pensions. Thanks to auto-enrolment schemes, media coverage and overall awareness, it’s very difficult now to ignore the importance of your pension.
The Q2 2017 Tackling The Savings Gap Consumer Savings and Debt Data report shows that in the last year, 598,000 employers were enrolled into a workplace pension scheme, making a £87.1 billion collective contribution over the 12-month period. With the popularity of personal pensions continuing, it’s clear to see that Britain is certainly more aware of its pension responsibilities.
If you’re unaware of how much you could potentially need in retirement, why not take True Potential Investor’s ‘Saving For Retirement: How Much Will You Need?’ quiz? Answer a few simple questions for an estimate of how much you could need in later life to live your chosen lifestyle.
However, findings from the Q3 2017 report suggest that we’ll need to take into consideration our existing debt and expenditure today, as our current financial commitments could be having an impact on how much we’re able to contribute to a pension. During the quarter, 45% of survey respondents failed to make a pension contribution; this was most common in 45 to 54 year-olds (47%). 18-to-24 year-olds were the second largest proportion of people who failed to contribute (44%).
When considered in relation to the report’s other findings, the above becomes particularly poignant. It found that a third of its respondents worry about money on a daily basis, while 37% admitted to lying about their debt. Perhaps then it’s not because of a lack of awareness; it may be because their financial situation simply won’t allow them to make a contribution.
The individuals who did add to their pension pot contributed £203 on average in Q3 2017, the report found. In contrast, the average amount of debt taken on by UK consumers each month stood at £370 — significantly higher than the amount put towards their pensions.
The Q3 2017 report also found that each month, we spend £143 on regretted purchases, whether it’s food, clothes, alcohol, or other items. If this money was invested in a pension instead for the full span from age 30 to 65, it could translate into almost £320,000. Based on the fact that Brits believe they will need £23,000 annually to live comfortably in retirement, this amount would be enough to fund 13 years of retirement.
This monthly spend reduces to a daily expense of just £4.70. As the above example shows, investing this amount instead could lead to a solid start towards your pension pot in retirement. As such, we shouldn’t underestimate the impact that small yet regular contributions can have. This underlines the importance of better financial management to allow us the capacity to add such funds to our personal pension pots.