MM readers, I’m going to be brutally honest with you now – I’m really starting to worry about my future. Let me give you a breakdown of my finances and it’ll become apparent why.
At the age of 37, I have a pension pot of just under £15,000. Yes, you read that right – £15,000 – barely enough to last me a year in retirement.
The aim of this article isn’t to play the world’s smallest violin for myself – I’m aware it’s my own fault that I am where I am and only I can do something about it.
But it does concern me. Every press release I receive about pensions adequacy and retirement income (and that’s a lot) reminds me how far off I am where I need to be.
On the flip side, it also makes me realise that there are millions of others out there who are in a similar boat and equally worried.
The size of the average pension pot for someone in my age group, depending on what research you read, varies from £15,500 to £39,500. Which means I’m a way off.
Retirees target pension pot would only last for 11 years
So how did I get to this point?
Well, I started my working career at the age of 18 back in 2006 – six years before auto-enrolment came in – so I spent those years not contributing anything.
Back then I’m not sure I even knew what a pension was, let alone thinking of paying into one. But that’s a whole other Weekend Essay about financial education.
I was only on £16,000 a year then too, so the chances are I probably wouldn’t have been able to put much, if anything, away anyway.
When auto-enrolment was introduced in 2012, I was studying for my NCTJ journalism exams then, when I secured my first journalism job at the age of 23 I was on £18,000 and putting pittance aside.
A couple of promotions took me up to £25,000, then £30,000, but I was still only paying in the minimum 3%. And the arrival of my first daughter put paid to most of the extra money.
I know the best thing would have been to up my pension contributions with each pay rise, but I didn’t – and here I am!
Now let’s move onto my savings – and the picture isn’t much brighter.
When my Grandad passed away last year, he left me £3,000, which I have tried my best not to touch, but these are the only savings I have.
I’ve put the majority of it into a Stocks and Shares Isa and it’s made about £400 since March through compound interest, which is good.
So, what am I doing to change my situation, I hear you ask? Fair question. As one of my old managers said: “Come to me with solutions, not problems!”
A friend of mine recommended Plum to me a while back, before I started at Money Marketing (I can almost hear the collective sighs of advisers up and down the country).
I know it’s not what most of this audience would recommend, but I’ve found it useful so far – particularly its ‘pay day’ feature, which takes money out of my account the day after I get paid without me having to think about it.
Currently, I’m trying to put £200 per month in. They have this thing called a splitter, which as the name suggests, allows you to choose where you want your money to go.
At the moment I’m putting 20% of that £200 into cash, 15% into a wedding fund, 10% into a holiday fund for a trip away somewhere, 20% into Vanguard’s Core US S&P fund, 20% into a Global Tech fund and recently, 20% into a Sipp.
I didn’t know back then what I do now – and one of the many reasons I’m grateful for joining Money Marketing is that it’s given me a wake-up call.
I know it’s not too late – I’ve still got time on my side and it’s better I realise now that I need to do something, rather than 30 years or so down the line when I am (hopefully) approaching retirement.
But some days, I can’t help but feel a sense of dread and despair when looking ahead to my future.
For the last 20 years I haven’t thought about my pension, which means I’m paying for it now and I’m going to have to spend the next three decades trying to catch up.
So, there you have it – that’s where I am. Kind of feels good to get it all off my chest, so thanks for reading (if you’ve managed to make it this far).
Out of respect to my employers, I won’t share my current salary, but I’m still paying the minimum 3% into my pension, which they match.
I don’t know if I should forget trying to put £200 a month aside into cash and investments and focus on increasing my pension contributions instead, but I think doing both would leave me short at the end of the month.
I know I could live a bit more frugally, but apart from a few days out with the kids and spending a bit more than I probably should on food and wine (two of the things that give me most pleasure!) I wouldn’t say I go too mad at all. I try and keep my outgoings to a minimum.
I cancelled all the subscriptions I don’t use, I rarely buy takeaway coffee anymore and don’t usually eat out more than once or twice a month.
I guess the answer is to do less of the things I enjoy and fewer days out with the kids.
If only I knew a financial coach or financial adviser, eh?
