Financial Fitness: Sorting Out my Pension

 

Pension are one of those important things that people regularly tell you that you're supposed to have and start as soon as possible.  Of course I didn't do that start as soon as possible thing, mainly because I worked a lot of part-time jobs and didn't feel that I was earning enough to be able to afford to do so and, of course, there was that idea that I had plenty of time.  However, it's never too late to start and thankfully I'm not quite at the half way point of my earning life so I decided, whilst I have some extra time on my hands, I would get it sorted now and go from there.

The first thing I needed to do was work out exactly how much I would need to aim for by the time I retire.  There's a variety of advise about this, with some people saying you should aim for around 70% of your annual income, which you then times by the number of years you expect to be alive, whilst other recommend just times your current earning by ten.  So that gives me a range of £170,000 to £230,000 by the time I'm 68.  Should be interesting.

I also checked the Government website and found that at the moment, based on what I've contributed through my National Insurance, I'll get £100 per week and, based on an estimation on what I'll contribute up to when I retire, I'll get £175.  All good to know.

I am lucky to have this state pension, unless that changes in the next thirty years, and a few of the companies I worked for did start a work place pension for me, one of which I carried on contributing to when I could until Covid happened (Nest if you're wondering, and no I'm not sponsored).  I decided to not go with a completely private pension scheme, it was all so complicated when I looked at it, but decided to keep with Nest as it's government based and, therefore and hopefully, government protected.  I wasn't sure if these previous pension schemes still existed and, if so, how much was actually in them.  Now that I had given myself an idea of how much I needed to put aside (all be it a rather large range) I needed to find out about these other private pensions and the plan was to combine them into one.  When I had previously looked at this, and then run away in fear, I am pretty certain that the Government was able to help you with this by using your National Insurance Number, but this time they just seem to give out contact details for the different pensions schemes.  So I went through my employment history and contacted those I knew had at least started a pension for me.  I knew that in most cases these would have been closed when I left the organisation, as I wouldn't have been there long enough, and the money returned to me.  However, I wanted to double-check that this was the case.  There is still on company I'm waiting to hear back from, but all the other pensions have been accounted for (I hope) and consolidated into one place.

Now that I have everything in one place I can see where I am and it's not a great place, my pension pot is not large, but it's not as bad as I thought it was going to be.  Using the Money Advise Service, and based on the idea I'd be able to pay £250 a month into my pension pot from now until I retire, I should be easily reach the £12,600 per annum which is 70% of my annual income.  I also did a little checking on Nest as well and, also based on the idea that I'm able to put aside £250 a month towards it, it came up with a pension pot of £156,000.  This amount is a little bit less that was I was wanting to aim for.  Funny how they have both come out differently, but it's good to look at non-the-less.  If I'm honest I could probably live easily off those amounts, but it would be good to have extra so that I can have a much more enjoyable, relaxed retirement and I can't really rely on the Government actually giving me the pension stated.

One thing that keeps popping into my head when I think about my pension, and which has nothing to do with the panicked thought about how little I'm putting in, is where the money is going when sitting in that pot.  After all, pensions are little lumps of money we give these organisations to, hopefully, grow by investing into companies and organisations.  I want to make sure that mine aligns with my ethical beliefs and doesn't support companies I don't agree with, such as arms dealers and tobacco companies, whilst supporting things like renewable energies.  Luckily, my pension was quite easy to switch to the 'Ethical Fund', but I know that other pensions aren't as open or easy to select and that might be something you want to think about.

There is one other thing I do need to think about here, and that's the fact that I'm still not earning at the moment and am, therefore, not able to contribute to the pension as I would hope.  This means that when I do finally start earning, and to get to the amount that I'm hoping for, I should actually be putting in around £300 per month as soon as possible.  Something to really think about when I come round to trying to work out my budget for 2021.  I'm wondering if I should start posting about my monthly budgets on here. What do you think?