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Save yourself from poverty in retirement; As the state pension review triggers fears of working to 75, Tricia Phillips shows how you can build up a healthy retirement pot.

WE could all do with putting a bit more away for our retirement - but now we are being urged to double pension contributions or face scrimping in old age.

A radical review could result in the state pension age shooting up for those of us who are under 55.

People in their 20s may have to graft into their mid-70s before they can draw their state pension.

And a review by the Labour Party has concluded that those saving into workplace pensions put away an average of 8 per cent of their income when this should be nearer 15 per cent to grow a decent-sized pot.

That 8 per cent is an average and many people are saving less - so even those doing the right thing and putting a bit extra away into workplace and private pensions could find they still can't afford to retire at a reasonable age.

If you don't want to have to work till you drop you need to take control of your pension savings now.

Here's how you can start building up the funds to guarantee you a long and comfortable retirement.

Pensions are a slow burn, so ideally you should begin saving when you first start work to give you the chance to build up a decent pot.

That way you don't notice the cash going out each month - what you haven't had you don't miss. You can also get away with putting away smaller amounts as your investment will have more years to grow.

A 20-year-old earning PS25,000 and putting away 8 per cent each month could build up a pot worth PS186,262 by the time they hit 67. That would give a yearly income of around PS8,256.

A 40-year-old who started saving at the same rate would end up with just PS81,713 and an income of PS3,062.

Andrew Tully, pensions technical this is the only way to end up with a decent fund.

A 20-year-old who followed that advice, starting by putting away 10 per cent, would have an impressive PS232,828 pot by the age of 67, generating an annual income of around PS10,319.

Whereas a person who started at 50, even if they put a hefty 25 per cent away, would end up with PS143,413, an annual income of PS6,455.

Ex-Pensions Minister Steve Webb, now policy director for Royal London insurance, said: "The moral of the story to me is not that people should or will work to 77, it is that the antidote to 'work till you drop' is to save more now."

You will be turning down free cash from your boss and the chance to build up a nest egg if you opt out of automatic enrolment.

Bosses must contribute to their workers' pensions and that means your savings pot does not have to be funded entirely out of your pay.

A lot of firms only pay in the legal minimum - currently 1 per cent, increasing to 3 per cent in April 2019 - but decent bosses will often match whatever you put in up to a certain percentage of your salary. That could be 8 per cent from you and 8 per cent from them, so this could be a way to help you achieve the optimum savings level.

If you are currently just putting in the minimum, work out how much you could afford to top that up by and find out if your employer is willing to match it.

We all know that finding the cash to save can be tough, but you don't need to pay the optimum 15 per cent into your pension from the beginning.

The best way is to start small and then steadily increase the amounts you are paying.

Whenever you get a pay rise or promotion, you could put that extra cash to good use by topping up your pension savings.

Andrew Tully says: "If you are lucky enough to get a pay rise, think about putting some of that money aside into a pension.

"You might not notice that 1 per cent in your pocket, but it could make all the difference to your future."

CAPTION(S):

director at Retirement Advantage, said: "We need to be realistic about how much people can save for the future given the other pressures on household budgets. "Starting as early as possible means you hopefully won't have to work till you drop." As a rule of thumb experts say you should start paying in a percentage equivalent to half your age. So, a 20-year-old should be saving 10 per cent, a 30-year-old 15 per cent and so

on. For those who don't start young

Start small and early to build up a nest egg, and you shouldn't have to work until you drop
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Publication:The Journal (Newcastle, England)
Date:Mar 5, 2016
Words:799
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