Tips | August 9, 2017

Why you don’t have a pension (and what to do about it)

Four ways to start saving for the retirement you want, when you can’t predict the future.


What we’re doing right now usually takes priority – it’s only natural. However, putting off the day you plan for the future can cause financial loss and inconvenience down the track.

It can be easier to focus on the things that must be done today or next week. This bias can keep future priorities at the bottom of your list – and means they take even longer to get done. What’s worse, retirement may not feel quite real for many people. If you’ve always worked, it can be hard to imagine what not working might be like.

Yet it will help to make concrete plans in advance. Here are our top tips for beating inertia and starting to save.

Top tip 1: Make a fresh start. Set a specific date to start saving for retirement, perhaps one that’s traditionally associated with beginnings, such as your birthday or the next New Year. Put this in your calendar for that day. The effect of a conscious fresh start can help motivate you to make all kinds of changes – so why not start your retirement fund at this time?

It’s true that modern life is full of demands on our time and we’re constantly bombarded with information about what we should do and the events happening around us. We have bills to pay, things to fix, and other items we already need to save for. How can we prioritise our pension needs when we have so much to think about already?

Top tip 2: Streamline the process with default options. For example, automate your saving by signing up to an employer-sponsored pension scheme where an amount is deducted from your pay regularly and invested for you. Or, why not set up an automatic “default” savings plan with your bank or other financial services provider?

It can be complex to decide what you need to do in future: after all, we cannot know what will happen then. But if a little money is automatically put aside for retirement, you’ll have one less future task to worry about. Do make sure the sum you save each pay day is high enough, though, to give a result when the time comes.

You may well feel you just don’t have enough money coming in to start saving. But there’s no guarantee that things will ever get any easier. And with the power of compounding, even small amounts will grow much larger over the years. Also, some plans may have offer tax advantages.

What do you want to do when you retire? Perhaps you envisage relaxing at home, without a care?

Top tip 3: Start early to maximise any benefits. Doing this is likely to prove even more important if your earnings don’t rise much over your lifetime. To see the difference, do the sums. Calculate how it all adds up – perhaps draw up a chart, and refer to it regularly. Think about the final goal and what it really means for you.

This is partly why banks talk a lot about financial capability these days. It means having the skills and knowledge to make your money work for you, which can be empowering.

Top tip 4: Think about your future self. Imagine your retirement years in rich and colourful detail; this is the life you could have if you start putting money away today. Who do you want to be and what do you want to do when you retire? Perhaps you envisage relaxing at home, without a care in the world – or maybe you’d like to study for a degree, renovate your house, or spend more time travelling?

Want inspiration? Here’s a list of 25 older folk who achieved amazing feats.

You might still argue that now is not the right time. You might feel you’re too young to start saving now for the “golden years”. Or you might say that you didn’t start saving for your retirement when you were younger, and that it is now too late.

But there’s a really easy answer to these objections: no matter when you begin saving or how much you save, you will still end up better off than if you had done nothing.

Of course, this may mean having less money today – and you may hate the thought of handing any part of your earnings over to others. If this feeling strikes a chord, reflect on this: finance professionals might actually be good at managing money, as that is what they’ve trained for. Insisting on control, as explained in this article, can leave you worse off in the end.

Meanwhile, taking action can help you feel more in control, as well as get you caring more about the final result. Invest your emotions as well as your money: motivate yourself to take charge.

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eZonomics team
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