Advertorial post with Aviva.
There are lots of things you can do to improve your finances; I talk often to people about saving more money, budgeting, tracking their spending and generally being more interesting in their finances. In case you haven’t noticed, I love talking about money. I think that more people should be open and honest about money, but I do appreciate that it is not a subject that most people feel comfortable with.
After all, the more we know about our own finances, then the better off we will be, in every sense of the word. This includes being aware of what impacts the different life choices we make have on our overall financial health. Different decisions can have a massive impact on financial health – both positive and negative – so it is worth taking a step back and thinking carefully about each decision. For example, having a savings account with an emergency fund stashed away in has a positive impact on your finances. Getting a car with a car loan has a negative impact on your finances. Knowledge here is key to you getting the best deal and also keeping hold of your hard earned cash.
But, there is only particular area of personal finance where I have a lack of knowledge about; pensions.
I know that I have one, and that I pay into it each month via my employer. I know that this will continue to do so until I no longer work which, if our plans work out, will be the year I turn 50. In fact, the money goes out of my paycheck before it even hits my account, so it’s money I don’t really ever factor into our plans.
However, that’s it! I know nothing about the ins and outs of pensions, how mine actually works and what the pot currently looks like. As a personal finance person, I feel a bit embarrassed about how little I know about pensions. I can totally understand why people didn’t have them before it become compulsory. When I started working, it wasn’t an option and I am grateful for that.
When I delved further into the world of pensions I came across a worrying statistic, about women and pensions. Did you know that the average woman will experience a shortfall of £106,000 in pensions over her lifetime compared to a man (source)? I didn’t realise that it was so significant. So, just by being a woman as opposed to a man, we miss out on over one hundred thousand pounds in our pension pot. That doesn’t seem fair, at all.
Of course, different circumstances do have a factor on this. On average, women get paid less than men to do the same job. Women are more likely to work part time, after having a child for example. There are lots of reasons why the gender gap affects finances, including investments and pensions.
So, instead of keeping my head in the sand about pensions, 2019 is the year I am going to change that. By investing the time to find out about my own pension and how it works, will only improve my finances this year. I can see how much it is worth to me, plus know how it will change going forward.
In fact, I know that this is going to be a quite simple exercise; I don’t really know why I keep putting it off. I think it goes back to the fact is I don’t know a lot about pensions. Talk to me about saving money – great. Anything to do with a budget? Fine. Pensions? Not a clue.
So, that’s my pledge. I should have written it into my 2019 goals; I pledge to find out about my own pension pot, how it works and what it consists of. I’m going to better my own financial knowledge about an area I genuinely know little about. It’s an all round win situation, as far as I can see.
What about you? What is one thing you could change this year to improve your finances? I would love to hear from you!
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Having recently started my own journey to financial independence I have started to take notice of my pension. As you say, the money goes out before you get paid and like you I never really took much notice of it. This month my partner and I sat down to consider how much money we would need to live on in retirement and how much our current pensions would provide. It was surprisingly reassuring, particularly as mine is a defined benefit pension. My partner has a private pension as he works for himself and we were able to make a rough prediction about how much that would grow over the years even if he didn’t put in anymore money and I was able to explain the 4% rule so that he could see how much it would give him when he is aged 60. It is all due to the FI community that I have increased my knowledge about this area and I am so grateful for this.
I really need to look into getting a pension. I’ve been self-employed for over three years and the only thing I have waiting for me when I retire other than a state pension (if they’re even still a thing by the time I qualify) is one year of contributions from a fixed-term job I had before becoming my own boss. And that’s not going to go very far!
Pensions, what a rip off! My husband started his private pension 30years ago at the age of 25. At that time you bought an annuity which he later transferred into the pension pot that we recognise today. During the 30 years the pot has fluctuated incredibly, during the recent financial crash his pot lost over £10,000! He was given a projection for his final fund, at 4% and 7%, which after 30 years came nowhere near the original projection. Financial advisors always say, stick with it, add more to your fund, the fund will make more money in the later years. Sadly we are not convinced, with the prospect of working another 12 years until retirement his fund has to work incredibly hard. If he had saved his contributions into ISAs or savings accounts, which takes determination not to spend it, he would be slightly better off. If you are lucky enough to work in a profession which provides a good pension scheme that will match your final salary, it’s a gamble. You also have to remember you may be required to pay tax on your private pensions. Pensions are better regulated and employers make a contribution nowadays . Who knows what the future holds for pensions, interest rates, mortgages and savings.
We are working on paying off debt so that we’re in a better position next year!
My pension does not look great! I think I need a bit of a financial shuffle. Many thanks for this!
I don’t know anything about pensions- but after being at home with children and now being self-employed mine is very sad! Look forward to a post explaining what we should know 😉😊
This is always one of my goals for the year and I am so focused on saving money, moving money around and making money work harder for us this year x