6 min read
Pensions for Individuals

Are you fighting fit for a fabulous financial future?

Catherine Miller

Find out with Maji’s Pensions MOT

September 15th is Pension Awareness Day. If the word pensions fills you with dread, don’t worry, you’re not alone. Seventy-seven percent of people say they don’t understand their pension enough to make informed decisions about saving for their future.

It all starts with small steps. Even the smallest ones make a difference. To help you get started, Maji has created a simple Pensions MOT quiz, with tips to help you get fighting fit for your financial future.

Six simple questions to ask yourself

1.  Have you lost track of any of your pensions? The average person will have six employers in their lifetime. Since each job comes with its own workplace pension, it’s easy to lose track of what money you’ve saved, and where. In fact, lost pension pots were worth up to £26.6 billion in 2023. It’s worth spending some time getting your pension details together so that you never lose track.

Tip: Make a list of which pensions you have from each of your jobs, including account numbers and contact details. Add to it whenever you start a new job.

2.  Have you considered consolidating your pension pots? One solution for keeping track of your pension pots is to consolidate them. This means to combine them into fewer pots, or even just one. Not only can this make your pension pots easier to manage, it may also lower your fees and charges. However, leaving a pension can also cause you to lose some fund-specific benefits. In some cases, you could miss out on some of your tax-free and savings allowances. That’s why it’s important to look carefully at the terms and conditions of your pension accounts before you make any changes. This is especially important if you have any Defined Benefit pension pots.

Tip: Research your options and read the terms and conditions of each pension before taking action. See the Money and Pensions Service advice for Defined Contribution and Defined Benefit pensions. Consider connecting with a finance professional to get help.

3.  Do you know how much your State Pension could be worth? The State Pension is a regular payment from the government, which starts at a set age. For example, for someone in the UK aged 30 today, the State Pension Age is 68. You’ll need to have made a defined number of National Insurance contributions over your working life to qualify to collect your State Pension. Whilst the State Pension is a good start, it almost certainly won’t be enough on its own to provide for a comfortable lifestyle after you stop working. Experts estimate that pensioners need a £37,300 a year income to enjoy a comfortable retirement.

Tip: Check how much you could expect to receive for your State Pension at gov.uk and from what age you can expect to receive it. Use this as your starting point to chart your savings course.

“Maji is a financial wellbeing app helping people improve their financial wellbeing, starting with pensions.”

4. Are you saving enough into your workplace pension? A few years ago, the government introduced a programme called ‘auto-enrolment’. This means most people are automatically added to their workplace pension scheme when they join a company. (Although it’s possible to opt out, doing so means they miss out on pensions savings.) It also means your employer has to contribute a certain amount into your pension (3% at time of writing), alongside your own savings. The combined contributions from you and your employer must total at least 8% of your earnings. Whilst this is the statutory minimum, experts agree that it won’t be enough to give you a comfortable lifestyle in retirement. They suggest people should be saving at least 12% of their total salary.

Tip: When you get a pay rise, remember to pay your future self by increasing your pension contributions over time. For example, raising your savings rate by just 1% each year could boost your final pension pot by 25%.

5. Do you know how many years of retirement to plan for? In the last century, most people only lived for a few years after retiring. The average life expectancy in 1960 was 71. Nowadays, we’re living much longer. For example, a woman aged 30 has a 1 in 4 chance of living to 96, and a 1 in 10 chance of living to 100. That means that most people of working age now will need at least 25 years’ worth of retirement savings. Taking action today gives you more time to grow your savings.

Tip: Use a calculator to see many years you will need to live off retirement savings after you stop working.

6. Is your workplace using a salary sacrifice pension scheme? Currently, less than 40% of small businesses are using salary sacrifice, a government-approved scheme which makes your pension contributions in a way that ends up saving you and your employer money on your National Insurance contributions.

Tip: Ask your employer whether they offer or have considered switching to a salary sacrifice pension scheme. It’s available to companies of all sizes. Salary sacrifice unlocks cost savings for them, gives you both a tax break and increases your take home pay.

It’s never too late or too early to start saving in your pension

It’s never too late, or too early to start thinking about the life you want to lead in the future and planning how to get there. Similar to how a journey of a 1000 miles starts with a single step, planning for your retirement starts with a commitment to make your pension a key part of your financial savings plan.

The good news is Maji are here to help. We’re a digital financial planner and coach, here to support you with all areas of your financial journey, including saving for retirement. With Maji, you can track all your pension pots in one place, with live valuations to see exactly how much you’ve saved in each one; create your own financial plan, to set and track your progress towards financial goals; increase your workplace pension contributions; learn more about your money; and connect with finance professionals for coaching and advice.

Get a Maji account

Maji is currently available through employers. We help your employer support you and your colleagues with your financial wellbeing, as well as saving the company money on their pension costs. If you’d like your employer to offer Maji as part of your benefits offer, ask them to get in touch with us.

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