Effective Ways to Boost Your Retirement Savings

Money jar

Money jar

Whatever stage of life you’re at, it can seem daunting (or even downright overwhelming!) to think about getting your finances in order. But sorting your financial affairs out sooner rather than later could help to ensure you are able to enjoy a relaxed, happy and comfortable retirement.

Ways to get started

First of all, have a think about the type of retirement lifestyle you would like to have. Regular holidays? Days out with your grandchildren? Luxurious spa days? Well, all of these things cost money, and whilst you may be entitled to the State Pension, it’s unlikely to be enough to cover an extravagant lifestyle.

After all, the State Pension is currently just £168.60 per week (£8,791 per year). And according to the Pensions and Lifetime Savings Association, a single person would need a pension of £33,000 per year to maintain a ‘moderate’ lifestyle. That would include a weekly food shop bill of £46, an annual two-week European holiday, an annual UK long-weekend break, and a yearly budget of £750 for clothes and shoes.

In comparison, a couple aiming for a ‘comfortable’ lifestyle would need a pension of £47,500 per year. This would allow them to splash out on a £91 weekly food bill, an annual three-week European holiday and up to £1,500 per person to spend on clothes and shoes every year. They would also have the budget to replace their kitchen and bathroom every 10-15 years!

Luckily, there are plenty of online resources to help you find out ways to boost your retirement savings. The Money Advice Service provides a Pension Calculator which will calculate your State Pension age and how much you can expect to receive. It will also allow you to work out your ‘target’ retirement income and use information you provide on existing pension pots and contributions to suggest what you can do to boost your retirement income.

What are the options for boosting my retirement savings?

Once you have calculated your potential retirement income, as well as any shortfall between this and the cost of the retirement lifestyle you would like, consider taking the following steps:

Join the company pension scheme: if you are not already making contributions to a workplace pension scheme, this is the best starting point. Since 2018, all UK employers have been required to auto-enrol eligible employees into a pension scheme. Even better, they are obliged to make employer contributions too. So, if you chose to opt out of auto-enrolment in the past, now is the time to opt back in.
Increase your contributions: if you are already contributing to a workplace pension scheme, take a look at your current monthly budget and consider whether you could increase the value of your contributions. Many employers match your contribution, so increasing the amount you put in will also increase the amount they are putting in

What if I am self-employed or not eligible to join a workplace pension scheme?

No need to panic – as long as you have paid the relevant National Insurance contributions, you should still be eligible to receive the State Pension. And you can also set up your own personal pension pot, which can be either a stakeholder plan or a SIPP (self-invested personal pension).

Is there anything else I can do?

Whatever your plans for the future, it’s always worth giving your finances an overhaul from time to time. Ask yourself whether you are currently spending more than you earn? If you are, you probably have a few debts to clear, whether these are personal loans, finance agreements or credit card bills.

If you don’t already have a Budget Planner, consider setting one up. Writing down everything you spend each month and year is a helpful way to see a snapshot of your current financial situation. And if you’re really honest with yourself, including daily spend on things like lunches, cigarettes or coffee shop lattés, the results can even be a little frightening!

Tips to reduce your overall spending

1. Always write a shopping list for your weekly or monthly food shop. Don’t visit the supermarket when you’re hungry and stick to the list! You could also try shopping in one of the budget supermarkets or online shopping.

2. Take your credit/debit cards out of your purse or wallet. When you’re going out, just take the cash you will need. That way, you won’t be tempted to make any impulse buys.

3. Make a packed lunch to take to work. If you’re currently spending £4 a day on a meal-deal, you could save about £1,040 per year. And even if you spend half of that on the ingredients for your daily packed lunches, that’s still a hefty £500 back in your bank.

4. Check whether you are paying for things you don’t use or need. Check insurance policies and packaged bank accounts – you may find that you are ‘doubling up’ on things like roadside assistance or mobile phone insurance. Are you using your expensive gym membership? Do you really need that monthly magazine subscription?

5. Work out how many hours you will need to work to pay for a large purchase. Want to buy a shiny new TV? If it costs £500 and you earn £15 per hour, that’s 33 hours (or nearly a whole week of full-time work!) to pay for it. Does it still seem worth it? Our advice? Sleep on it before making a decision!

Whether your retirement bucket list includes plans to travel the world, take up a new hobby or renovate your home, there are plenty of ways to boost your retirement savings. And by making a few simple changes today, you’ll be able to enjoy tomorrow!