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This series offers easy tips for managing your pension, for every decade of your life: in your 20s, 30s, 40s, 50s, 60s or 70s.
Your 30s is an important decade for financial planning and getting your retirement savings in order is all part of that.
Gone are the early adventures into adulthood of your 20s when most of your paycheck is blown on rent, leftover money is spent freely and saving towards your pension is at the bottom of your priority list.
By 30 you may be moving up the career ladder and seeing earnings rise and you are likely to have a whole host of new financial priorities, including saving for a first home, paying a mortgage or starting a family.
But it’s important to remember that they are also crucial years to get your pension savings in order. Here are a few pension tips for those wanting to maximise their retirement savings.
1. If you haven’t started already, enrol in your workplace pension
Retirement may seem a long way off but even saving small amounts will ensure you have a more comfortable retirement than those who don’t, said David Stevens, of insurer LV. Importantly, it’s not too late to start in your 30s if you haven’t started already.
He said: “Delaying saving into a pension is a mistake when saving for retirement because the earlier you start, the longer your money has to grow. Saving £100 a month starting at 35 could produce a pension pot of £85,700 at 65, but this falls to £45,500 if you delay until 45.”
Anyone who is 22 or over, employed and earning £10,000 or more will be automatically enrolled into a pension scheme chosen or run by your employer. Via this, a minimum of 8pc of your earnings between £6,240 and £50,000 will be invested for your future. You will contribute 4pc, your employer at least 3pc and the Government will top-up another 1pc via tax relief.
Mr Stevens said it was a good idea to increase contributions each year as your salary rose.
As a retirement rule of thumb, you should aim to save half the age at which you started as a percentage of your salary each year, according to Tom Selby of AJ Bell, a pension provider.
For example, if you start saving at 20 then you aim for 10pc, while delaying until 30 means you’ll be targeting 15pc and waiting until you’re 40 will mean you need to set aside 20pc of your salary, he said.
2. Keep tabs on your tax relief
For every £80 you save the Government adds £20 in the form of tax relief and higher and additional-rate taxpayers can claim back extra tax relief from HM Revenue & Customs. If your contributions are paid before you pay tax then you generally don’t need to do anything, your scheme will be getting full tax relief.
Some workplace pension schemes such as salary sacrifice arrangements and net pay schemes will pay the tax relief automatically so long as your contribution comes from salary taxed at 20pc or higher.
However, if you pay your pension contributions after you pay tax, say in a self-invested personal pension (Sipp), then you will only be getting 20pc by default and need to reclaim any higher or additional rate tax.
For example, if you pay £80 into a Sipp, that will be boosted to £100 regardless of how much income tax you pay but a higher-rate taxpayer could claim back a further £20 while an additional-rate taxpayer could claim £25 extra.
This can be done via a self-assessment tax return or by calling HMRC and must be done every year to make sure the right amount of tax relief is given.
3. Keep track of old workplace pensions
Every time you start a new job you are likely to open up a new workplace pension. You should keep on top of all your pensions by staying organised with the paperwork, said Brian Henderson at Mercer, a consultancy.
He said: “If you change address then contact your pension providers to let them know. It will make your life easier later.”
You should consider switching pension providers or consolidating all your pensions into one scheme if it’s beneficial for your savings. However, if it is a large sum you should consider taking regulated independent financial advice before doing so.
4. Check in on your investments
The way you invest your pension can significantly boost the size of your pot in the long run and in your 30s you are likely to be investing for 30 or even 40 years.
If you do not make any decisions about your investments, your auto-enrolment pension will be chosen for you by your employer and you will be placed into the "default investment fund".
This benefits from a cap on charges currently set at 0.75pc but it might not be designed based on how you might want to invest.
Mr Selby said savers should at the very least have a look at the default fund they are invested in to make sure they are happy with the investments they own and the level of risk they are taking. He said: “While attitude to risk differs from person to person, generally younger investors can tolerate greater fluctuations over the short term as they don’t need to access the money for decades.”
Historically, those who have accepted volatility over the short term have generally been rewarded over the long run, he added.
Mr Henderson, of Mercer, said those in their 30s can afford to maximise their investment return given the long time period to retirement.
“You could think about investing in stocks and shares around the world including some higher risk allocations such as emerging market investments and small capitalisation stocks and shares,” he said.
If there is a fall in stocks and shares then your savings have plenty of time to recover.
Once you have chosen your investments you should not be tempted to keep changing it on a regular basis. The more you change your investment strategy, the more you are likely to lose value, studies have shown. Trading investments too often can add extra costs with no guaranteed payoff.
Ask Kate a question | The Telegraph’s pensions doctor
5. Consider opening a Lifetime Isa
If you are nearing your 40th birthday and you have not opened a Lifetime Isa then it may be worth paying in £1 to keep the option open for future investments, Mr Henderson said.
The Lifetime Isa can shave years off your saving time as all investments are met with a 25pc top-up paid by the Government. The more you can save, the more free Government money you can get. The bonus you can get with the Lifetime Isa is up to £1,000 a year up until the age of 50. That is a maximum boost of £32,000.
A Lisa allows you to save up to £4,000 a year and you can use the cash and bonus either towards a deposit when you buy your first home or after you turn 60. But you can only open one if you are under the age of 40 and you can only invest into it until the age of 50.
Beware, if there’s a risk that you might change your mind about buying a house and want to withdraw your savings for another purpose, then the Lifetime Isa may not be for you.
It has restrictions that mean you can withdraw the money only for a first home, at the age of 60 or older, or terminal illness. Otherwise you will pay a hefty exit penalty, which is intended to take back the bonus.
6. Top up your pension savings as much as possible
If you can afford to, you should maximise your contributions into your pensions.
Topping up your pension savings on a regular basis, for as little as £50 a month, can have a significant positive impact on the value of your savings at retirement, Mr Henderson said.
However, remember only to top up your pension savings if you can afford to and prioritise any outstanding short-term debts first.
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