IT’S never too late to save, but it can seem like there is no spare cash to put aside.
Here’s how to find some. And by cutting your bills, quitting expensive habits, and using your salary wisely, you could build a much healthier pension pot.
1. Stub out BAD HABITS
GIVE up smoking and you could save a packet. Calculations by NHS website Smoke Free show that someone who smokes ten a day could save GBP26 a week by quitting. That’s GBP1,369 a year.
It might be easier said than done, but it’ll give you thousands of pounds extra a year in old age. Put it all in to your pension and it will give you a pot of GBP116,273 over 30 years of investing.
There is one downside though, because, ironically, now you are expected to live longer it means the amount you’ve saved will have to stretch that bit further, and so you’ll get a little less income each year for every pound in your pot.
2. Switch HOME LOANS
Not bothered to switch your mortgage recently? You could be missing out on hundreds of pounds of extra dosh.
Borrowers can currently get their hands on some of the cheapest rates in living memory. For example, Yorkshire Building Society this week launched a five-year fix for those with a 40 pc deposit at just 2.59 pc.
Watch out for the fees that push up the overall cost, though. A cheaper overall package might be the 2.74 pc five-year fix at Norwich & Peterborough, which has lower charges.
If you are on a typical standard variable rate of 4.75 pc you could save GBP157 a month, or GBP1,884 a year, by switching to the Norwich & Peterborough deal, according to figures from brokers London & Country.
This is based on a GBP150,000 mortgage over 20 years. Your repayments would fall from GBP970 a month to GBP813 when you switch.
3. Tune out pay TV
CANCEL your TV package when it finishes, and you could be upwards of GBP30 a month better off. If you have all the sport and movie channels it’s likely to be nearer GBP50.
Think how much time you actually spend watching those you pay for, compared to the channels available at no extra cost with Freeview.
Do an experiment. For a week, jot down how many of the programmes you watch regularly on free-to-air channels. This will help you decide whether to keep pay TV. If you find there are lots of other films and sports you watch, consider new pay-as-you-go services such as Now TV, or online film rentals LoveFilm or Netflix, which allow you to watch them for cheaper.
Assuming you cut your TV bill by GBP30 a month it can give your pension a GBP15,218 shot in the arm over 20 years.
4. Cut back on coffee
BUYING your own lunch every day is a costly routine - even the cheapest sarnies can set you back GBP3 to GBP4. Then you’ll probably buy a drink to go with it. So why not make your own sandwiches or salads, bring in leftovers, and drink tap water?
To really get richer, cut back on those shop-bought coffees. A medium-sized cappuccino at Costa Coffee costs GBP2.45. Altogether it could get you an extra GBP7 a day. Spread over a 47-week working year this is a saving of GBP1,645.
Put it all in your pension and it can add up to GBP139,715 if you get into good habits from the age of 35. And even if you are only ten years from retirement it will be GBP26,450 more.
5. POWER UP YOUR POT
THIS year’s never-ending winter has been expensive, particularly for larger homes that take a lot of heating. To compound matters, there seems to be an endless round of price increases by the major energy firms.
And bills are expected to rise another 5 to 10 pc this summer because of Britain’s low gas reserves. So, it’s vital to be with the cheapest energy supplier. Shop around for a fixed dual-fuel deal, where you get both gas and electricity from the same firm. The easiest way is through a comparison site or visit our sister website thisismoney.co.uk/energy.
Rates in your area will differ between British Gas, EDF, Npower, E.ON, Scottish Power, and Scottish & Southern.
On average, the typical household could save GBP155 a year by switching, according to comparison site Uswitch. That’s GBP6,553 over 20 years that you can use to boost your pension.
6. Cheaper car cover
YOU always want the cheapest deal on your insurance, but scrimping on cover can back-fire because cut-price policies can be loaded with catches and huge excesses.
The key is shopping around and reading the terms and conditions carefully before you sign up. Half of people who switch car insurance at renewal save more than GBP50 over a year, according to analyst Consumer Intelligence.
And the biggest savings can give you GBP241 a year more, says comparison website GoCompare. On top of this, one in four save up to GBP115 by switching buildings and contents policies. Add these together and you could make yourself GBP356 a year better off - that’s a nice chunk for your pension without any sacrifices. Don’t just check comparison websites as some big names don’t subscribe to them.
7. Bundle your bills
MORE than a third of us haven’t switched broadband provider in four years or more, research shows.
Many customers are likely to be languishing on outdated and wildly expensive old tariffs. The knack is to bundle the costs of your home phone, broadband and TV (if you have decided to keep it) into a discount package. Comparison site broadbandchoices.co.uk says phone and internet typically costs GBP62 a year - a massive reduction from four years ago when broadband alone cost an average of GBP132 per year.
Bundled deals that include broadband, home phone and digital TV can save you around GBP200 a year in total. Across 30 years that will add GBP16,974 to your nest egg.
8. Shop and get rich
BUYING all your essential shopping through a so-called cashback website is a very good habit that can really boost your pot.
All you have to do is visit a website such as Quidco or Topcashback before you do your online shopping.They give you commission if you do this, typically between 3 pc and 10 pc.
This is collected in an account and you then transfer it to your bank.
Around 3,500 High Street shops are signed up, including Argos, Debenhams and Tesco, as well as travel companies, mobile phone operators and energy suppliers.
On average, a family of four saves GBP780 a year, according to Quidco. Put that money into a pension for 30 years and you’re talking GBP66,249 without spending an extra penny.
9. GET FIT FOR FREE
GYM memberships can cost anything from GBP30 a month to nearly GBP100. But if you don’t use them regularly they can quickly become bad value. So go for a run in the park, or buy some weights or a bike instead.
Be careful before you cancel a gym contract - some have sneaky terms and conditions that can mean you’ll end up paying even if you want to stop going. Based on a typical GBP50 a month membership fee, someone aged 55 could add GBP9,648 to their pension by age 65.
10. USE pay-rises wisely
ANOTHER nifty habit to get in to is to put a little extra away whenever you get a pay-rise.
Say you earn GBP30,000 a year and get a pay-rise to GBP35,000, just put 10 pc of that payrise - GBP500 - into a pension each year. If you do it from the day you get the extra cash you won’t notice the difference. And you’ll still be getting a bigger pay cheque.
Saving like this, a 20-year-old starting on GBP20,000 salary rising steadily to GBP50,000 by age 50 could put away GBP559,167 by their 65th birthday. This is one of the biggest contributing factors to our overall pension pot figure. The figures are still impressive if you’re just ten years from retirement, adding GBP77,545. Jason Witcombe, a chartered financial adviser at Evolve, says: ‘Plenty of people could save GBP100 a month without it making any meaningful difference at all to their lifestyles - some could save much more.’
How it adds up
Most of the time people make a saving on their bills but never really see the cash - it simply gets swallowed up by their day-to-day spending.
Work out how much better off you will be by cost-cutting, and then put the difference into your retirement fund.
Do this every year, and you’ll quickly build a significant nest egg. This is particularly the case where pension contributions get tax relief. Essentially, what this means is that the Government will give you back all the income tax you have paid on the money you put aside.
So, if you pay in GBP100, and you’re a basic-rate taxpayer - 20 pc - you’ll get GBP125 in your pot. If you’re a higher-rate taxpayer - 40 pc - you’ll get GBP166. These figures are calculated by advisers Hargreaves Lansdown, based on your savings growing by 5 pc a year investment returns after charges. All figures are in today’s money and rely on putting aside the cash every year until you hit 65.