No shortage of calls on your money right now?

This could still be the right time to think about your pension.

National Pension Awareness Week begins on 15 September. That may not be looming large on your agenda right now, but it’s something that’s really worthwhile. It’s a time when organisations like Aviva help people get talking about pensions, and how they fit into the bigger picture of personal finance.

Maybe you’re thinking that you’ve got enough going on in your life right now…

It’s understandable that many people will be thinking like this. Especially if you’ve got shorter-term priorities, or family concerns, foremost in mind. But unlike a lot of the issues many of us face, it doesn’t have to take a lot of head space, or take too much out of your budget, to make a difference to your future by giving pensions a little more attention.

Financial security for you and yours… now and in the future

We shouldn’t ignore the part pensions have to play in helping provide financial security. A pension is designed to replace your regular income when you choose to stop working.  You may use your pension for day-to-day spending in the years after work, and maybe help the people close to you... either immediate family members or others you care about.

And though there may be a long time to go before you consider retirement, it’s a good idea to consider whether you're contributing enough right now, rather than leaving it until later. With most personal and workplace pensions, your money is invested. And the sooner you start investing, the longer your money will have the opportunity to grow. 

The power of long-term investment

Let's look at what might happen if:

• You put £100 into a pension now, and
• The investments within it were to grow by, say, 5% in a year.
  • If this was the average annual growth over 20 years, you’d then have about £265.

This is just an example, of course, and it’s important to remember that the value of an investment can go down as well as up, and you may get back less than was invested.

Another thought: given this example, if you’d waited five years more instead of starting right away, you’d only have had around £207 at the end. Not £265. So, an early start could lead to a more comfortable retirement… or the chance to retire earlier.

Think about the difference tax relief can make

There’s another reason to think about pensions as part of your financial planning—tax savings. When you contribute to a workplace pension, you benefit from tax relief. The way you receive this will depend on what type of pension scheme you are in and what rate of income tax you pay, but this makes saving into your pension a tax-efficient way to invest in your future.

It’s also worth bearing in mind that, if your employer offers a workplace pension scheme, it may come with employer matching contributions. Some employers may also pay into your personal pension. This is essentially another way in which you could receive additional benefits at no extra cost. You pay into your pension, and your employer pays in too.

Why talk about pensions?

During Pension Awareness Week - and the other events across October and November that make up what we call the Pension Engagement Season – Aviva will be offering people the chance to find out more about the way pensions work, with webinars and fresh insight on this website.

We want to start conversations. Because discussing your financial goals and plans with someone you trust can provide valuable insights and support. Family members are perhaps the most important people to talk to – because their long-term financial security is likely to be a top priority for you. You might also talk to friends, a partner, your employer or a financial adviser. The people you talk with may offer different perspectives, knowledge, or even share their own experiences – especially if they’ve got to grips with the way their own pensions work.

Take a look at the full picture

You may be thinking that you’ve got more important shorter-term financial priorities than your pension. And rises in the cost of living probably haven’t helped here. But this shouldn’t stop you from thinking about planning for the longer term and finding out just how much you could afford to devote to this – including pension contributions.

Make a plan to work out what you can afford to put aside for the future

Here’s how to get started:

1. Set your goals: beyond your regular expenses, this is the point to work out what your short term (1-3 years), medium term (3-10 years) and long-term (10 years+) goals are.
2. See where you stand now: list all your income sources and keep track of your expenses for a month, to see where your money goes and what you could cut back on. To complete the picture, add up any savings and investments you have and deduct anything you owe.
3. Create a budget: use your research so far to decide on a budget for your long-term needs. It’s worth thinking about how much you’ll need for different purposes, such as a travel fund, home improvements or retirement income. Review your budget regularly to make sure it still fits your goals.
4. Build an emergency fund: the only thing we can expect in life is the unexpected! Putting aside money to cover three to six months’ expenses could make a big difference. It may also help you to sleep at nights!
5. Think about your pension contributions: if you’ve followed the four steps above and find you have some spare money, you might want to boost your pension contributions.

Help to get the conversation started

Aviva want to help people discover that pensions don’t have to be confusing, scary, or just something to think about when you’re close to retirement. On our Financial Wellbeing Hub, you’ll find links to information and explanations to demystify pensions and their role in planning your financial future.

It’s time to talk about pensions!