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When you begin working, there are a lot of new responsibilities to take on. Sorting out your pension is probably on the bottom of your list; it can be tempting to brush it off and assume it will all sort itself out by the time retirement comes around.

Unfortunately, it’s not that simple.

In 2014, one in seven people retired with no private pension – with women three times more likely to have no pension savings. Since the introduction of the workplace pension scheme these figures are set to diminish, but there are still some disastrous mistakes Britons are making when it comes to their pension.

Not Having One

Saving for a pension might seem boring when you could be spending that money on your Saturday night out, but leaving it until last minute is mistake number one. Although you won’t have to just rely on a basic State Pension if you’re enrolled in the workplace pension scheme, you should still consider the best ways to save.

The maximum basic State Pension is currently £115.95 a week, so relying on this solely would require a massive lifestyle change for most. The rise of retirement age means this would also have to stretch further – so keeping some extra savings on top of this will allow you to retire comfortably.

Not Reviewing Regularly

How is your pension invested? Not sure? Then you should definitely be reviewing your pension on an annual basis.

Millions of adults are unaware as to how much they have in their pension funds. Fluctuations in investment are one of the main ways you could be losing out on pension money – but if you don’t review then how would you know?

There are also many hidden extra charges of a pension fund that are easily ignored, so by failing to review you could be spending a lot more on your savings than you need to. Ignorance is not bliss after all!

Not Hunting for a Bargain

By not reviewing your pension it’s probable you’re not getting the best pension deal you can. Being aware of what other offers are around can increase your pension by a significant amount – but if you don’t look, you will never know!

If you know how much you pay for your mobile, you should know how much you’re paying for your pension. And most of the time, you know exactly what it is you’re getting for you money when you buy a mobile phone. Many people don’t know what they are actually getting when it comes to a pension.

Services you can receive will vary depending on your pension provider. Some of the services that can be on offer include:

Putting off Saving

The longer you leave saving, the deeper the trouble you’ll be in. If you leave saving a pension until you’re 50, you’ll obviously have to save a lot more than you would have at 20 in order to receive the same amount.

A rough rule of thumb that many use is taking your age, halving it, and paying that percentage of your annual pre-tax salary into a pension fund. The earlier you save, the lower this percentage will be, so it’s well worth starting your pension as early as possible.

Not Saving Enough

With all the different factors involved in pensions it can be difficult to know exactly how much you need to save in order to have a decent pension when you retire. The estimated average life expectancy in the United Kingdom for 2015 is 80.54, and the UK retirement age is set to rise to 66 in 2020.

So while you might have longer to save, you should take into account what period of time you will have to spend this over, as well as inflation. You might save £10,000, but that would get you a lot more today than it will in the future.

A great tool to use is an online pension calculator, as you can work out your State Pension age, date and the basic State Pension income amount you will receive. Some also allow you to input a target income which can then calculate how much you will need to save to reach this amount.

Relying on Inheritance or Property

If you’re relying solely on anything for your pension, it should be a water-tight deal. Anything where there’s room for doubt should motivate you to keep extra savings in case this doesn’t add up to everything you’d hoped for.

If you’re hoping for an inheritance to keep you warm in your older years, then the amount you’re going to receive should be clarified. You don’t want to get to retirement age to only find you’ve been given less than you thought.

If you’re relying on property investments for your retirement fund, then it is worth diversifying your money into different assets. Putting all your eggs in one basket is a definite risk, so consider either keeping separate savings or using different assets.

Are you worried about your pension fund? We have a beginners guide for pensions which can be found here.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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