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If you’re on a defined-benefits (“final-salary”) pension, then you’re probably either already drawing it or in the public sector. For most people, defined-contributions (money purchase) pensions are the only option available now. That means the onus is on you to maximize your returns so that they literally fund the rest of your life. Here are some tips.

Start saving as early as you can

When you’re young, saving can be really hard. It is, however, definitely worth making the effort. Given enough time, pennies really will turn into pounds. At the very least, do as much as you can to avoid getting pulled into consumer debt. It may seem hard not to be able to do what “everyone else is doing” but if you can’t afford it you can’t afford it.

Keep saving for as long as you can

If you’re heading into your silver years with minimal savings, then you have two options. You can give up and take the lifestyle hit for what could be a very long time. Alternatively, you can keep saving for as long as you can.

This doesn’t necessarily have to mean keeping going in full-time work (although it can do). It can mean phasing your transition out of work. Basically, you’ll aim to limit your need to access your retirement savings in the early part of your retirement.

Use auto-enrolment if you can

If you can’t, then see if you can persuade your employer to pay their contributions into a regular private pension. Remember, auto-enrolment does not get you “free money”. Employers have to calculate their employment packages on the assumption that you’re going to enrol. If you don’t, they still have to work on the assumption that you could change your mind at any time.

Admittedly, your employer isn’t obligated to backdate pension contributions. In other words, they could choose just to keep what you don’t claim. There is, however, no harm in asking.

Save outside of pensions

There are good reasons why pensions are generally the mainstay of retirement planning. There are, however, also downsides to saving through pension funds. Arguably the single, biggest drawback of saving for retirement through pensions is that the government has a large degree of control of what you can and can’t do.

The government’s argument for this control is that pensions savers get tax breaks to help them fund their pensions. It is therefore entirely reasonable for the government to set rules around the use of the funds they’ve saved with the help of these tax breaks.

To be fair, the rules were made a lot more flexible in 2015. That said, there is nothing to stop a future government from tightening them up again. More realistically, there is nothing to stop a future government from placing restrictions on how, and when, you access your pension. That includes your private pension.

In fact, the government is already planning to increase the age at which you can access a private pension from 55 to 57. This will put it 10 years below the age at which you can access a state pension. If the government keeps this pegging, there is a distinct possibility of further age increases at a later date.

Tell your kids they’re on their own after education

You don’t, literally, have to kick your children out of the house as soon as they’ve completed their education. You should, however, be making it clear to them from their early years that they will be expected to stand on their own two feet.

In the real world, this is probably going to involve them doing things they will not necessarily like. Quite bluntly, they may need to take on unpleasant jobs and/or deal with the benefits system. Resist any temptation to subsidise them so that they are spared this. You will be doing major damage to their future just to make your kids’ life a bit pleasanter now. Also, this means, that once you have finished paying for them, the money you have can be put toward your pension savings.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
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