‘Effective’ pension tips: How to save for retirement regardless of your age or budget

Pension: Expert gives advice on preparing for retirement

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Saving for retirement is vital to ensure one has enough of a pension pot to support them once they stop working. Les Cameron, Pensions Expert at M&G Wealth, spoke exclusively to Express.co.uk to discuss how Britons can save regardless of their budget or age.

He said: “There are many theories on how you plan for a comfortable retirement.

“Some say try to save up 10 times your average salary, others work out how much they need to save to be able to have an income of two thirds of their final salary.

“A common one is when you start saving to save at least half your age for the rest of your life e.g. if you’re 30 when you start saving 15 percent of your income.”

Mr Cameron urged Britons to assess the amount of income they need to meet their retirement needs and then work out how much they need to save to get there.

He explained: “This is known as ‘target-driven’ planning, and where budget is not a problem this is an effective way to plan for the retirement of your choosing.

“However, for many people, especially in these unprecedented times, how much can be saved is ‘budget-led’, where saving is driven by affordability.

“To make your retirement as comfortable as possible you need to save as much as you can, as often as you can and start saving at as early an age as possible. A little, often, goes a long way.”

M&G Wealth calculated the amount someone might need to save in order to achieve £1,000 of annuity income per month from age 65 onwards, increasing by three percent each year to keep up with inflation.

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The calculations include 50 percent going to the spouse on death, and the figures assume average investment growth after charges of four percent.

A 20-year-old would need to save £22 per month including tax relief. For a 30-year-old, it increases to £36.

Someone aged 40 would need to put away £65 a month.

As people get older, the amount of money required to be saved each month rises significantly.

A 50-year-old would have to save £135 a month, more than double the amount a 40-year-old needs to save. Someone who is aged 60 would be required to put away £501 a month.

These figures highlight the importance of starting as early as possible in saving for retirement.

Mr Cameron encouraged people to make use of the reliefs and allowances available, especially pension tax relief which could make their savings go further.

“For most people it is especially important to join any workplace pension as soon as possible, as your employer will often add just as much to your pot as you do,” he said.

He also explained that one way to make saving towards a pension a bigger part of someone’s financial routine is to treat it like a monthly bill.

Mr Cameron concluded: “Many people see their spare income as what they have left after they pay all their bills.

“To make a more comfortable retirement possible then you should consider some form of saving as an essential ‘bill’ too.

“Similarly, we all enjoy getting a pay rise and, when and if this happens, it should mean an increase to how much we can save as well as how much we can spend.

“And remember anyone can pay into your pension, so if the older generation perhaps has excess income or is looking to reduce their IHT liabilities then getting them to pay into your pension instead can help everyone – they save in IHT and you get a pension and tax relief.”

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