Funding your future: Focusing on your pension contributions

Are we heading for a cost of retiring crisis?

That’s what the research seems to show. One in four big businesses in the UK say more of their people are opting out of company pension schemes¹.

It doesn’t take a rocket scientist to work out why. With loads of families struggling to get by, paying the bills today takes priority over saving for a retirement that’s years away.

For some, saving for the future isn’t a conversation they want to have. Whether that’s out of necessity or a blatant refusal to accept it’s a current concern, is it time to start educating employees on why their pension scheme is a vital cog in planning for a comfortable retirement?

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Picture the scene.

You’ve opted out of the company pension scheme. You want to prioritise today and forget about tomorrow. Well, what if we asked whether you could cover your entire day-to-day living costs with a weekly contribution of just £203.85 per week?

That’s the maximum new state pension payment for those that reach 66, as things stand. £10,600 a year. Hardly fills you with confidence, does it?

You may not have opted out. You may just be contributing the minimum requirement of 5% of your salary, with an additional 3% topped up by your employer. But even still, will that be enough?

We appreciate we’ve bombarded you with questions, so perhaps it’s time to give you some answers.

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According to Standard Life², the minimum amount needed for a single person to retire on is £12,800 a year. For moderate comfort, you should be living off £23,300 a year, and for a comfortable retirement, £37,300 a year.

Already, it’s clear to see that the full state pension isn’t enough…

By the time you hit 45, it’s claimed you should have already saved 4x your salary, with a target to have hit 8x times by the age of 60³. From the weekend mavericks to the savvy savers, needing a figure of roughly £300,000 is arguably enough to replace the monster in your nightmares.

Looking after future you

None of us want to be looking under the sofa for spare change when we’ve waved goodbye to our careers. Saving for tomorrow can be a little like saying a fond farewell to a close friend who is moving to another country. You’ll see them again, but not for some time.

We sat down with our very own benefits expert, Joy Waugh, to ask what you should be contributing to save for your golden years.

‘I think most employees should think about how much they need to put in.

‘It’s hard to quantify what on average people should be putting away. Pensions are tailored to individual people. There’s no one-size-fits-all approach. Think about what you can live off when you retire.

‘When you consider the living wage and your pension, a contribution of 12% should ideally be the absolute minimum you’re putting in. Naturally, the younger you start, the better your returns. Investments grow. Let’s say you start with your minimum 8% auto enrolment, and increase it slightly each year. By the time you’re 30, contributing 12%, that’s a brilliant place to be in.

‘The cost of living crisis is obviously affecting people right now. The younger somebody is and the further away they are from retirement, they may be tempted to cut down their pension contributions. It can be tempting, but putting into your pension might not give you little bit extra right now, but it will certainly benefit you going forward. The more you put in, the greater chance of growth you have through the years.

‘When you get to 50, you may want to slow down with work slightly, so it is an ideal time to review saving for life-after-work and accelerate contributions to enjoy retirement ’

For more information on how Zest can help with your pension platform, click here.