I have a £10,000 pension and earn £26,500 at 30 – how can I boost my retirement?

In our Pensions Crisis Coach series, we aim to help ease your retirement worries. Are you concerned you’re not saving enough for your later years? Do you want to know if you have enough to retire or don’t know how to find your lost pensions? Email us at money@theipaper.com. We’ll seek to get you on the right track with help from some of the best financial experts and advisers in the business. Allie writes: I am 30 years old and am very interested in learning how to save and budget and still enjoy life. I only have a small pension of about £10,000 and want to know what I can do better to boost this while also saving for a wedding. I earn £26,500 a year and I have £1,700 in savings. I would love to be able to retire when I am 65 but not sure what I can do now to make that happen. Alina Khan, The i Paper’s money coach reporter responds: When you are in your twenties and thirties life can be busy and there are many milestones you probably want to tick off, like buying a home or getting married. It is understandable that your retirement and pension isn’t always at the forefront of your mind. Although your pension pot is relatively small, you are young and still have time on your side to maximise pension contributions. Shorts You added that you pay £500 in rent a month, and that your monthly expenses are around £900. Kamahl Best, an independent financial adviser at wealth management firm Ascot Lloyd, suggested finding out if your employer will match your pension, putting in the same percentage as you. He said: “I would encourage you to explore the costs and investments within the workplace pension. As a rule of thumb we would want to keep associated costs as low as possible as this means more money in your pension to compound (which is interest on your interest). “For someone of your age I would encourage you to explore the underlying investments in your pension as these are the ‘engine’ which determines how well it performs. Considering you have 35 years until you want to access it, I would consider a majority allocation to “equities” which are part ownership in the great companies of the world that we use every single day.” As you are young you will most likely change jobs a few times in your career, so it is important you keep a note of how many pension pots you have and where they are, so they are easy to track down when you do come to retire. Best said: “If you move employers consider consolidating pensions together as this reduces the likelihood of you losing valuable money.” You mention wanting to retire at 65 and potentially travel, therefore you will need to bridge the gap between 65 and 68 which is when you will (under current laws) be able to have access to your state pension. You will need to make sure that you have enough at 65 to fund your income requirements for the 3 years and then enough to top up your state pension. Pension UK’s Retirement Living Standards gives a good gauge of how much money you would need in retirement to fit the lifestyle you want. To go on a two-week all inclusive holiday once a year as well as a staycation in the UK, a couple would need £45,400 a year, it says. However, it is important to note that these standards are not a target but simply a guide to give you a better understanding of how much you will realistically need. They also assume the person has paid off their home so you’ll have to add rental or mortgage costs to that, if applicable. Best said: “Using the ‘4 per cent rule’, which says how much could be withdrawn on an annual basis safely without running out of money in 95 per cent of scenarios, as a couple you would need pension pots of £507,620 (likely slightly more due to you wanting to retire at 65 opposed to 68). “This may sound overwhelming but your expenses are not high in relation to your income. After you have paid for your wedding I would recommend that you consider contributing more to your pension than the minimum amount you would have been auto-enrolled into.” When saving for the wedding, if you want to save and budget more efficiently, you need to set goals and become clear with what it is you want to achieve and when. Best said: “Ask yourself, how much do you expect to spend? When are you getting married and when does it need to be paid for? This gives you an indication as to how much to save each month.” You currently have £1,700 in your savings pot and Best suggested looking into opening a cash ISA with the best interest rate – you can research this on money comparison sites. Currently, you can put in £20,000 if you’re under the age of 65, this falls to £12,000 for the year next April. The best easy-access cash ISA at the moment is with Trading212 for new customers, offering a return of 4.56 per cent. The best one-year fixed cash ISA is Vida Bank with a rate of 4.7 per cent. Best said: “I would advise you to build an emergency fund. Typically, I would recommend 3 to 6 months of expenses to be sat aside in an easy-access savings account for you to access easily in the event of you losing your job, or car problems or anything along these lines. “This will add some security to your finances and reduce the need for you to utilise credit for expenses,” he explained. As for enjoying life currently, Best suggested cutting spending on what doesn’t bring you joy and spend money on what does. He said: “For example, if buying new clothes is a chore rather than joyous then don’t worry about spending hundreds on designer T-shirts. Spend only what you absolutely have to. “This gives you more money to spend on things that bring you joy. This may be holidays or even a more-expensive-than-typical gym membership.” The fact you are actively thinking about your finances is a positive first step and by adopting some changes it will allow you to build strong saving habits. I hope you have a lovely wedding when it comes – and retirement!