Three smart steps
You can’t be sure what you’ll get from your company pension plan, but there are three steps you can take to improve your chances of financial security in retirement.
1. Save for as long as possible
The earlier you start your pension – even with small contributions – can make a huge difference to its final value, because your savings have longer to benefit from stock market growth.
Starting your pension today rather than next month or next year (even if you’re no longer young) could make a big difference. After all, the longer you delay, the more you’ll have to contribute to catch up.
The value of starting early
An example of what you might get at retirement if you start saving at different ages, based on contributing 10% of your salary a year and retiring at 65:
| Starting age | Years to retirement | Salary | Value of pension |
|---|---|---|---|
| 20 | 45 | £30,000 | £1,200,000 |
| 30 | 35 | £30,000 | £571,000 |
| 40 | 25 | £30,000 | £248,000 |
| 50 | 15 | £30,000 | £90,700 |
Based on a male employee with salary increases of 4% a year. Assumes investment growth of 7% a year and charges of 1% a year. Source: J.P. Morgan. This is for illustration only; actual investment performance and charges levied could be higher or lower.
2. Save as much as you can
It’s easy to overlook a pension but increasing your pension contributions even by a few pounds a month can make a big difference to the final outcome. If you are in a company pension plan, check whether your employer will also make a contribution on your behalf.
Bigger contributions may result in a bigger pension.
Based on a man aged 35 retiring at 65, currently earning £40,000 a year with salary increases of 4% a year.
Assumes investment growth of 7% a year and charges of 1% a year. Source: JPMorgan. This is for illustration only; actual investment performance and charges levied could be higher or lower.
3. Choose the right investments
To help your pension contributions grow your pension plan may offer a choice of investments, such as:
- UK shares (‘equities’)
- Shares in overseas markets such as the US, Europe and Asia
- Lower-risk bond funds or cash funds
By understanding these different choices and the risks they are associated with, you can select the investments you are most comfortable with. You can then create a strategy that spreads the risk of investment, while maximising the prospects of your investments growing.
Read about different investment choices and how they could be used to create the right investment strategy for you.
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