Top Ten Tips: Getting on the pension ladder

By CARRIE HERON
Published on 14/07/2012 13:51

TRYING to secure a foothold on the pension ladder when your finances are squeezed in the current climate can be tough. But by starting to save into a personal pension when you are young, you could make a real difference to when you can afford to retire. Carrie Heron, financial services expert at Brewin Dolphin in Edinburgh, offers tips on making savings to put away into a pension pot for later years.

Travel

How many of us drive or take the bus to work? Perhaps your distance to work could be a manageable walk or cycle, rather than a cramped commuter ride to the office. Not only would the fresh air and exercise do us a world of good, the savings made can also be put to better use. Currently, a single bus journey in Edinburgh is £1.40. Someone commuting in the city every day could save £14 a week by walking or cycling to and from work – amounting to an annual saving of around £650.

Coffee Time

That “posh” coffee on the way to work costs us around £2.50 a day. By limiting this treat to, say, a Friday, savvy workers could save £10 a week, around £480 in the working year.

Lunch Time

The sandwich shop around the corner from the office is a popular destination for lunch, but swapping this for home- made lunches will help with the pennies (and also the lbs). By bring lunch from home you are more aware of what you are eating and if an average lunch is around £3.50, this will save £17.50 per week. This is a saving of £840 over the course of the year.

Exercise

How many of us join a gym in January with the aim of becoming more fit and losing the pounds? More often than not, the only pounds lost are from your bank account as gym attendance wanes. On a gym membership of £60 a month, this could cost us around £720 a year. Make more use of where you live by walking, running or cycling through the streets and parks and be happy in the knowledge that it’s free. Alternatively, not only are many municipal gyms as well-equipped as the expensive chains, they are also significantly cheaper.

Buying Magazines

Magazines are pure escapism. They allow us to keep up with the latest trends and showbiz gossip. But by keeping the monies that we would spend on them we could use the cash to help buy the luxuries we wish for when reading them – or to pay into a pension. It would be easy to spend £5 per week on a couple of publications, which equates to £260 a year.

Socialising

By no means should we be sitting at home counting the pennies we have saved, but we can become more money-wise. Sign up for the money-saving sites, such as Groupon, to see the great deals on offer, or go out earlier and take advantage of pre-theatre deals. The average cost of a three-course meal out is around £20. If you dine out once a week, take advantage of one of the many two-for-one offers and split the cost between you, that’s a saving of £520 in a year.

Smoking

Thousands of people give up smoking each year with a view to bettering their health. Why not also think about improving your finances at the same time? Someone smoking 20 cigarettes a day, at a cost of £7, could save nearly £2,500 in a year. Then there’s the life insurance savings. If you quit for more than a year, tell your insurer because your premiums will fall immediately.

Mix swishing with shopping

Don’t miss out on having something “new” to wear but think about having something new to you, rather than brand-new, and mix your retail purchases with some swishing (swapping clothes). Getting friends together for a swishing party can not only clear the clutter at home but give you a new wardrobe at little cost. Swapping a £40 splurge in the shop per month could save around £480 per year.

Shop around for energy

Shop around for the best energy deals using price comparison sites. Energy switching site uSwitch.com says that between 1 July and 31 October last year, more than 10 per cent of people who switched energy supplier for both gas and electricity saved £420 or more.

Maximise and reinvest tax relief on your pension

A personal pension plan is the most tax-efficient saving vehicle. Monies are paid net of basic rate tax to the pension plan, with the provider investing the gross amount on your behalf so for a basic tax rate payer for the £80 you save you get £100. However, if you’re a higher rate tax payer remember to claim the difference between basic and higher rate tax relief via a tax return and consider reinvesting it in your pension. If you’re a higher rate tax payer (40 per cent) paying £250 a month into a pension you save £100 a month on tax.