Britons could boost pension pot by over £1,500 per year simply by working from home

'People put their heads in the sand' with retirement says expert

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Pension saving can often be a chore to a lot of people. It involves putting more money aside now to potentially benefit in the long-run. However, it can be particularly rewarding when it actually does come to leaving the workforce. With life expectancy increasing, Britons are spending more of their adult lives in retirement than ever before. But this has major financial implications as people no longer have the constant income of a salary or wages that they have come to expect during their adult lives. Many people are now spending 30 years in retirement, and thus will need to budget appropriately to ensure they have enough cash to see them through to cover not only their essentials, but also meeting the cost of any particular later life goals they had in mind.

However, pension saving could be eased, new research has suggested, as Britons have the potential to save more money due to a major life change many have been required to adopt over the past year and a half.

This is working from home, which could have the potential to save working individuals significant sums of money over the course of a year, something which can go towards their pension pot to give it a well-needed boost. 

According to a poll undertaken by Nutmeg, Britons have saved an average of £241 each per month by working from home since March 2020 – a result of reduced travel costs and other expenses which can quickly rack up into significant savings. This could equate to a total increase of £1,538 per year.

More than one in 10 of those asked said they would be directing some of these savings into their personal pensions. Those making additional payments into their pensions decided to allocate over a third of their total savings made from working from home – a total of £128 each on average.

Annabelle Williams, personal finance specialist at Nutmeg, commented on the matter, and said: “COVID-19 has caused extra financial strain for many people.

“However, it’s positive that many others have been able to save money, often for the first time, or used the money freed up by not commuting or going on holiday to grow a bigger nest egg.

“The pandemic has highlighted the harsh reality that we all need savings to rely on. We have a huge problem with saving in Britain. Too many people lack even basic savings for emergencies – too many people are a broken boiler away from getting into debt.

“Even among those who have savings and pensions, most don’t realise how much they’ll need to live on in old age and could do with putting more into their pensions now while they can.

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“As social distancing rules are gradually relaxed and the temptation to spend increases, people should try to keep some of their lockdown mindset when it comes to their money. 

“Continue to set aside as much as possible for pensions or other suitable long-term investment products.”

For many people, the time spent at home during the pandemic has given more food for thought for engagement with one’s pension saving and planning for a future once they have departed from the workforce.

A third of those asked by Nutmeg said they have taken their pension planning more seriously during this time. This is as one in four said they use the extra time in lockdowns to research what options they have when it comes to their pension.

In this sense, choices are varied. Some may opt for Pension Wise, the free and impartial service designed to provide help on defined benefit pensions. Others, however, may choose the support of a financial advisor to give them tailored assistance to suit their individual needs. 

But despite improving attitudes towards pensions and topping up one’s pot, savings accounts still have the edge in terms of where people are deciding to put any extra money they have recently garnered.

Some 41 percent of those who have saved during the pandemic have now said they are topping up their savings, directing nearly half of this cash into savings accounts. 

A total of 19 percent said they were leaving money in a current account, while 22 percent said they are investing their savings – an option which can have some level of risk, but could create rewards. 

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Ms Williams concluded: “Savings accounts are useful products for people looking to set money aside for a rainy day. Though it’s important to make sure you can access your money if you need it, easy-access accounts tend to have poor interest rates which means they may not be the right place if you’re hoping to increase your wealth to meet long-term financial goals.

“As flexible working becomes a more permanent feature in many of our lives, people should make the most of the money saved from not having to commute or buy lunch at the office.

“It’s important to take the time to consider options for how these savings can work as hard as possible over the years to come. 

“Supporting cash savings with regular pension top-ups is one way to ensure you’re doing so.”

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