As a youngster, saving for old age seems like a pretty alien concept. There are so many more immediate demands for your money, and most of them seem like a lot more fun. When it comes to peering into your future, it’s difficult to look past the next few weeks, let alone imagining how you’ll get by in retirement.
Unfortunately for the workers of today, the increasing life expectancy and aging population means it’s now more important than ever to start saving for your pension when you’re young. So, if you’re taking the first tentative steps towards investing in a personal pension, here’s a little advice to help you on your way…
No one is expecting you to put a big chunk of your monthly pay packet aside to invest in a pension at this stage in your life, but every little helps. If you start small and commit to making regular monthly payments, you’ll soon accumulate a pot of money you can build on as your circumstances change.
It may seem like an alien concept, but every contribution you make to a personal pension will attract an instant top-up from the government. In this world, that’s probably as close as you’re going to get to free money, so make the most of it and start making those personal pension contributions.
Eggs and baskets
The key to a personal pension is to diversify your investment. Putting all your eggs in one basket is extremely risky, because if any should go wrong, you could lose all the money you worked so hard to save.
Money should be spread across a number of different types of assets, such as equities and bonds, and across different countries and industry sectors. This dilutes your risk and improves your chances of having money invested in high return areas.
Transparency and simplicity
One of the biggest gripes people have with personal pensions is their complexity. In some cases they can only be accessed through an independent financial advisor (IFA), which adds to the cost of the pension. Once the money is invested, it can be difficult to check how well your funds are performing. People have fallen foul of this in the past by failing to check the progress of their pension for a number of years. They then reach retirement age, only to discover their pension pot is not nearly as substantial as they had hoped.
However, a new breed of personal pension provider is emerging that’s committed to making the whole process simple, clear and transparent. Digital platform Nutmeg, off the back of its success as an uber-accessible wealth management system, now offer an online solution which allows young savers to set up their personal pension, with the help of an advisor from Nutmeg, in as little as ten minutes.
You are then free to check the performance of funds and manage your payments with no more than a couple of clicks. What’s more, you will not need the expensive assistance of an IFA, and management fees range from just 0.3 – 1 percent, with no sneaky add-ons.
It’s your future, so make sure you plan for it!