There’s a family to raise, cars to drive, houses to buy, student debts to pay off and holidays to be booked, so you don’t need to worry about your pension yet, right?

Wrong!

It might seem like a long time until you finish work – and the chances are the retirement age will continue to rise as we all live longer – but the right time to start retirement planning is now!

After all, your retirement could be the longest and best holiday you ever have – as long as you make sure you have the funds to pay for it!

Put simply, paying into a pension is one of the easiest and most tax-effective ways of ensuring your financial future.

There may be other financial pressures – such as a bigger mortgage or a new car – but you should resist the temptation allow these issues to push retirement planning to the back of your list of priorities, because, the later you leave it to start planning for your retirement, the greater the risk of a miserable, never ending retirement affected by deprivation, financial hardship and poverty!

Retirement planning is all about the maths, but it’s not rocket science!

1. Time is Money

The money you invest earlier in life is potentially worth so much more than money invested later in life – this is because the investments have so much longer to grow in value, which is in no small way down to No 2.

2. Einstein’s Theory

Albert Einstein is said to have called compound interest the ‘eighth wonder of the world’, reportedly adding: “He who understands it, earns it; he who doesn’t, pays it.” Whether he said it or not, the way compound interest works is undeniable. Investment returns generate future gains, and the longer the money stays invested, the bigger the returns!

Consider Colin, who starts investing £400 per month net into his pension at age 25 and increases his contributions each year by 2.5% as his salary increases. By the time he reaches his State Retirement Age of 68, he has amassed a pension fund of £1,000,000.

His friend Carl puts off his retirement planning and only starts saving when he reaches age 35. Saving on the same basis, at age 68, his pension fund is only £556,000. In fact, because of the delay in order to match Colin’s fund, Carl would have to start his saving with monthly contribution of £716 net.

(Source: O&M Systems assuming basic rate tax relief at 20%, using mid range investment return of 5% per annum. These are representative projections and are not a guarantee of what you could receive at retirement. Past performance is not a guide to future performance. Inflation could reduce the real value of your pension savings.)

3. It’s not taxing

You can claim tax relief on your pension contributions, and the higher rate of tax you pay, the more money you can claim back! So, for those in the highest tax bracket, for every £100 invested in a pension, you can claim £45 in tax relief. Pensions are one of the most tax-effective ways for high-earners to save for the future.

4. Flexible Friend

These days it’s up to you when and how much you invest. In days of old (well, 30 years ago!), when you started a pension plan you had to invest a set monthly amount for a fixed period, and the amount you had to pay could increase. Now there are policies where you can change the amount you pay each month, make one-off contributions or choose not to pay in at all.

5. The long haul

One of the keys to a good pension is to be prepared for the highs and lows. People who pulled their money out of the Stock Market at the start of the financial crisis in 2008 have missed out on the rally in the markets in the past eight years. There is uncertainty again now, with the vote to leave the European Union, but that doesn’t necessarily mean it is time to give up on your long-term investments.

Retirement Planning – Speak to an Innes Reid pension expert TODAY and let us guide you through the pension maze and give you advice on how to save for your greatest adventure – retirement.

Call us on 01244 347583 or email info@innesreid.co.uk to arrange a free, initial consultation – we are available at times to suit you.

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The chancellor reportedly intends to introduce a new system of flat-rate tax relief on pension contributions.

All workers would receive tax relief of somewhere between 20% and 30%, hitting higher-rate taxpayers in the pocket and saving the Treasury an estimated £6bn a year.

Mr Osborne may not go ahead with the reforms, of course, but if he does we’re sure to hear claims from many commentators that the pension is dead.

Don’t believe the doomsayers, though. A flat rate of relief would indeed have a negative impact on high earners, but that doesn’t mean they should give up on pensions.

The bottom line is that – and this is hardly a startling revelation – as a nation we are simply not saving enough for retirement.

Younger people face a particularly worrying scenario. Recent research by Royal London revealed the extent of the problem. It showed that:

• Today’s 35-year-olds need to have saved at least £666,000 by age 65 to secure the same standard of living of today’s pensioners
• The cost of living for a pensioner is expected to soar by nearly 150% by 2050
• Today’s 30 – 40 year olds have a median pension pot of only £14,000, well short of the fund they require to secure a monthly income that will just cover the predicted basic £1,715 cost of essentials in 2050

Royal London found that the biggest single piece of financial advice 65-75 year olds would give those in their 30s is to start saving as soon as possible. Only 2% would tell a 35-year-old to not worry and to live for today.

The importance of passing the savings habit down through the generations is perhaps the main reason that, whatever the chancellor announces on March 16th, today’s high earners should stick with pensions.

Leading by example and extolling the virtues of retirement savings to the next generation could be the key to defusing Britain’s pensions time-bomb.

Call us today on 01244 347583 or email info@innesreid.co.uk for advice and guidance on all aspects of pension and retirement planning.

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