Scottish Widows has urged everyone to take a closer look at their pension plans as National Savings Week gets underway (22-26 September).
Robert Cochran, retirement expert at the pension firm, warned that just 39 percent of people are currently on course for an adequate retirement, while a quarter admit they don’t fully understand how pensions work.
“Making financial decisions about your retirement starts with understanding what pensions are – long-term investments that help you save for later life in a tax-efficient way,” he said.
He shared a set of practical tips to help savers get started and stay on track, which has the useful mnemonic ‘SAVE’.
Cochran’s tips:
- Sit down and plan: Review your financial situation and set clear goals. Know what pensions are available, from the state pension to workplace schemes.
- Auto-enrol: Don’t opt out of your workplace pension. From age 22, employees are automatically enrolled and contribute at least 8% with employer support. Scottish Widows is calling for the age to be lowered to 18 and for contribution rates to rise towards 12 percent.
- Value: Keep track of the total value of your pensions, especially if you have multiple pots. Tools such as Scottish Widows’ Ready-Made Pension and #PensionMirror aim to make consolidation and engagement easier.
- Enhance: Maximise your pension through salary exchange, a tax-efficient way to boost savings. This could increase pension contributions by as much as £463 a year.
“Start early and make small, manageable increases to contributions over time,” Cochran added. “Even 1 percent more can make a big difference to your retirement pot.”