It’s something millions of us are encouraged to do as soon as possible, but can saving for retirement really make a difference? In short, the answer is yes. Even setting aside a seemingly negligible amount of out monthly or weekly pay packet of, say, £5 or £10 a time can add up over time. Saving £10 a month for 30 years can, with interest, give you something approaching the £4,000 mark.
When it comes to having enough money to live on once you’re ready to finish work for good, the more you save, the better. Saving up is the smart thing to do, especially if you think that the state pension alone isn’t enough to cover the basics, but how should you spread out your retirement savings? Having a pension product to help boost your income is the best bet.
Piece by piece
Some pension products are more sensible than others. A straightforward workplace pension might cover the basics, but it might not yield enough for you to truly enjoy life. Annuities, on the other hand, may be able to give you a little bit more from your money, but how? They work by guaranteeing you a percentage of the money you’ve saved over a set period of years.
They’re seen as being tax-efficient too, which is handy if you feel the taxman has taken more than his fair share from your pay in the past! Also, annuities help to give you a little peace of mind when wondering if you can afford to pay for all life’s essentials from month to month. However, they can be a little complicated to understand for someone who’s only started to think about the future.
The rate which annuities pay out depends on a number of factors. Health, financial circumstances, being single or in a relationship and life expectancy all have positive or negative impacts on rates paid out, which have historically dropped. If you’re a little confused about how annuities actually work, the annuity calculator from My Pension Expert is a fantastic resource and helps you to work out what you may be entitled to.