Closing the 'pensions gap'


#1

Saving for later life is a cause close to our heart at Starling. In our blog, we explore the ins and outs of pensions and debunk a few myths.

Read the original blog post : https://www.starlingbank.com/blog/saving-for-pension/


#2

My handy tip regarding pensions relates to contributions while you are not in PAYE employment.

While it is easy to contribute to a pension while PAYE, if you are self employed make sure you pay into a pension while you are self employed.

If you are out of work in some circumstances your National Insurance payments are covered by National Insurance credits (if you a stay at home mum with young children or if you are registered unemployed and actively seeking work) but if you are not having credits paid on your behalf look into voluntary contributions. While you may not be able to afford them that tax year you have a few years leaway to pay them, and such contributions count towards your ultimate pension entitlement when you retire. Too many years without National Insurance payments or credits and you will get a reduced payment, as pensions are based on years of contributions.


#3

Excellent article. I am constantly telling the youngsters at work how important it is to save for retirement from a young age. I just wish someone had told me to do the same when I was younger!


#4

I’ve got a pension, no idea how they work. They confuse me.


#5

I have several different pensions scattered around from different jobs over the years, as I have had a pension since the age of 17. Still don’t understand how they work.


#6

Have a look at PensionBee* - I transferred my existing pots and am very happy with the service. It’s really easy - they do all the leg work for you :slight_smile:

* We each get a £50 pension contribution if you use my link.


#7

For @Joe_Merriman, @Gallifreyangirl and anyone else confused by pensions, simply put it’s a savings scheme where your money is invested for long-term growth. You get tax relief on your pension contributions and your employer will pay in too, so it’s a great way of making the most of your money.

When you retire, you can take up to 25% of your pension pot as a tax-free lump sum. The remainder is used to give you an annuity - this is basically regular income you’ll receive until you die.

The stats say most people want around 60% of their salary as an annuity. Given many people would have paid off their mortgage, will have reduced travel costs, etc. this should lead to a comfortable retirement.

The earlier you start saving, the more chance you have to grow your pot to a decent size. As well as any private pensions you have, you’ll also get your state pension, which is currently around £8,500 per annum.


#8

I currently put 4% of my salary into my pension, the company I work for puts in 9%.

Wouldn’t be without it :slight_smile:


#9

That makes sense. I always advised people to save 15% of their gross salary into a pension


#10

I currently pay in 8% and my employer pays in 4%. I intend to gradually increase my contribution to around 15% over the next few years.


#11

Who needs a pension?! That’s what inheritance is for!


#12

for when your relatives are determined to spend your inheritance before they die so there is nothing left


#13

Exactly!


#14

Chances you wouldn’t have listened if someone did tell you this nugget of info as the last thing on kids minds is being old and wrinkly. The balance is usually, either going out on the lash or saving for retirement. I know which one I would have chosen without any thoughts!


#15

Thank you! I am finding out what my employer contributes as I cannot remember.


#16

Yes and yes = this is a big elephant in everyones room. No one gets pensions right!! Number one is to get the NI contribs upto date, then max out the employers pension contribs.
The problem is that pensions are like swimming against the tide - the money evaporates with inflation and unexpected expenses at ‘retirement’. For myself, I am expecting to work on and on, and am happy with that idea.


#17

Really good article! I’ve recently taken the time to review all pension info available to me after being completely confused and not knowing enough on the subject to make any informed decisions. I’m fairly young (25) and it’s very easy to fall into the trap of not ‘worrying’ about it! I’ve already taken the advice in saving as early as possible. I contribute 10% each month and my employer matches. Unfortunately, (like most now) I’m in a defined contribution rather than a defined benefit scheme, compared to some of my luckier, older colleagues!


#18

I currently contribute 10% and my employer contributes 7%. I will increase my contributions to 13% over the next couple of years. I’m basically playing catch-up after 14 years working for myself and not having a pension. Just wish I’d been given some advice when I was younger. I have a very old pension in the PPF too which won’t pay out much.


#19

I’ll be doing my best to avoid buying an Annuity though. From what I’ve seen they represent poor value for money. I aim to draw down from my fund each month.


#20

It depends @BoutTime. Annuities guarantee you a fixed income for the rest of your life. Drawing down could leave you better off but if you live for a long time, depending on the size of your pot, you could run out of cash!