Risks of delaying starting your pension savings

Brewin Dolphin leading Wealth Manager with an office in Exeter reminds savers that it’s easier to get the pension you want if you start sooner.

Tim Walker , Head of Brewin Dolphin in Exeter, ”It’s easy to convince yourself that there are better things to do with your money today than planning for say, 30 years’ time. So starting a pension savings plan may not be top of your priorities, but you may be surprised how much of a difference starting earlier could make to your future – and you should consider the risks of delaying getting off the mark.”

Even delaying a pension by a few years can have a dramatic effect. Brewin Dolphin figures (in the box below) show that if you are 25 now and want to retire at 68 on £20,000 a year in real terms you can achieve this by saving £790 a month gross. But if you start saving at 45 you would have to save £1,830 a month to achieve the same goals – and much more if you leave it even another five years.

The cost of delay is clear

Target £20,000 net pension in real terms at age 68 (excluding State pension)

Source: Brewin Dolphin. Figures assume a yearly investment growth of 2.5%, inflation of 2.5% and fund charges of 1% a year. Contributions assumed to increase at 4% pa. Pension is RPI linked with a 50% spousal benefit. RPI is 2.5% pa. £10,600 personal allowance assumed to increase in line with RPI each year.

Once you realise the consequences of delaying starting your pension savings, it may prompt you to take action sooner. And it is reassuring to know that you can get guidance that can make a meaningful difference to your circumstances.

Tim Walker urges a sensible approach. “Because the pension’s arena is complicated it needs to be navigated with care – the decisions you make now can have strong implications for your future. That said, it’s better to get started on saving in some way for your retirement as the costs of delaying could make a tangible difference to your future quality of life.”