Financial expert explains how to get the most from your pension
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Building a pension pot can often feel like a significant feat to overcome, but it is possible through thinking about the matter carefully. While there are likely to be setbacks and difficulties along the way, being prepared for these will ultimately be the best course of action. One top expert has drawn inspiration from the Antarctic expedition of Roald Amundsen – the first man to reach the South Pole 111 years ago – to devise a new retirement planning strategy.
While this may seem like a strange point of comparison, there could be vital lessons to learn from this key historical moment when it comes to planning for retirement.
Express.co.uk spoke exclusively to Rob Gardner, Director of Investments at St James’ Place Wealth Management, who laid out five steps to help Britons on their retirement journey.
Firstly, Britons should start their retirement planning by mapping their route – regularly checking their pension to see if they are on track.
Mr Gardner said: “A good rule of thumb is to have a pot worth ten times your annual salary by the time you retire, which sounds like a lot, but is achievable by starting early and breaking it down into simple steps.
“By the end of your 30s, you should aim to have a pot that’s equal to three times your annual salary. At this time of life, you may be tempted to postpone pension saving – especially if you have kids and a mortgage.
Pension: How the ‘Amundsen method’ could help you save thousands for retirement (Image: Getty)
“But if, like Amundsen, you don’t deviate from your route and have the discipline to stick to your savings plan, you will have more chance of creating your dream retirement.
“In your 40s your savings goal should be six times your annual salary by the time you turn 50. Earnings often peak in this decade, giving you the opportunity to take advantage of greater financial resources to make bigger strides towards your retirement target.”
However, in a similar sense, having a clear financial plan is not enough, and Britons should always expect the unexpected.
Before setting off on a money saving journey, it will be important for individuals to have a base layer of financial resilience to build upon over one’s lifetime.
While people may indeed face bumps in the road, being prepared for these is important, and Mr Gardner suggested establishing an emergency fund separate from savings for this very purpose.
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Pension: Monthly sum needed for a £100k pot (Image: EXPRESS)
Although this may seem like a challenge, once a person embarks upon the habit with a few lifestyle adjustments, it could be easier than they think.
Mr Gardner also recommended cutting back in some ways, such as reviewing subscriptions, eating out less and pausing gym memberships to help Britons accelerate towards their goals.
As a third step, those planning for retirement should always be consistent with their goals.
Mr Gardner continued: “With a plan in place and your emergency fund topped up to ensure you can weather the storms on the expedition ahead, you’re ready to set off on your journey.
“For a comfortable retirement, you want to be putting away 15 to 20 percent of your salary, which at first glance can feel like a challenge of Antarctic-expedition-proportions.
“But if you think like Amundsen, you’ll be pleased to know that this is achievable with one small step – or change in behaviour – done consistently, over decades, like swapping what you’d spend on your daily coffee bought on the way to work, which can make a latte difference to your future self.”
If a person contributes £100 per month to their pension, including National Insurance this equates to £1,320 per year, £13,200 over a decade – or £20,000 if invested with the long-term in mind.
Keeping this up over an entire 40-year career could mean an ultimate pension pot of a substantial £300,000.
Mr Gardener said a fourth point of action is learning from the experts for a safe retirement journey.
Seeking pension advice could help Britons to amply plan for later life, when it comes to reviewing, planning and even adjusting one’s finances.
Financial advice is key even after a person has reached their “destination” of retirement, he said.
This is because Britons will also have to manage and monitor their rate of spending once they depart from the workforce and stop earning.
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As a final point of action for retirement, Mr Gardner suggests respecting the environment – as this is something which people can easily forget.
He explained: “Your pension is being invested in companies around the world and how these businesses behave has a huge impact on the wellbeing of our planet.
“Investing your pension in a sustainable and responsible way is 27 times more impactful for the environment than flying less, eating less red meat, or cycling to work.
“So, for a comfortable retirement in a world worth living in, be a good explorer and leave the path in a way that future generations would like to find it, by asking your HR department how your pension provider invests your money, and if they’re not already, ask that they invest it responsibly.”
This so-called Amundsen Method can be perfect for those planning for retirement as it considers long-term approaches to one’s goals.
Mr Gardner concluded by urging people to focus more on this factor, rather than the external issues such as their salary.
This allows individuals to think about how they will respond to challenges, which are much easier to face when a person is planned and prepared.