Most people are well aware of the fact that they should be saving more for retirement. However, they do not know how much they should be saving. The average pension pot in the United Kingdom is £50,000. The government introduced the auto-enrollment scheme in 2012. Employers are required to automatically enroll people in the workplace pension.
However, the amount that an employer contributes will be relatively low. That is why you will have to make regular contributions in order to get the maximum savings. There are many things that you can do to grow your pension pot.
What You Should Do
You will need to join the company scheme as soon as possible. The contributions that your employer make will help you grow your pension. Most employers do this anyway because of the auto-enrollment scheme. However, it is a good idea to pay more than the minimum.
If you are self-employed, then you will need to set up your own pension. You will not be able to take advantage of an employer’s pension. That is why it is imperative that you start saving money as soon as possible.
Additionally, it is a good idea to seek advice if you are not sure where to get started. The advice that you get can have a major impact on the amount of money that you are able to save.
What You Should Not Do
You should not rely on your state pension. The age that you can get a state pension is always increasing. The government recently increased the state pension age from 67 to 68. This change will take place in 2037. People who are in their late 30s or early 40s will be impacted by this change.
You should not underestimate the amount of money that you need to save. If you are making £27,000 per year, then you will need to save up at least £500,000. You will need to save £1,000,000 if you make £40,000 per year.
You should not forget that there are limits that apply. The maximum amount that you can contribute is £40,000 or 100 percent of your salary. The lifetime allowance is £1,000,000. If you contribute more than that, then you will be subjected to additional taxes and fees when you withdraw the money.