Could you boost pension by £1,500 each year? How working from home could aid retirement

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For all the interruptions that the Covid-19 pandemic has brought to people’s lives, such as limiting social gatherings and forcing them to change the way they work, there has also been a positive impact on the pension pots of UK workers. It has been revealed that by working from home, one could save over £1,500 each year to put towards their retirement savings.

A survey conducted by digital wealth manager Nutmeg found that Britons working from home during the pandemic managed to rack up savings of £241 per month on average, providing a much-needed boost to their rainy-day funds.

More than one in ten (14 percent) subsequently directed some of these savings into their personal pensions, with those making additional payments into their pensions allocating over a third (36 percent) of their total savings made from working from home.

That allowed them to put an extra £128 per month towards their retirement savings, and by maintaining this behaviour post-Covid, Britons could give themselves a pension boost of £1,538 per year.

The long-term shift to flexible working due to the COVID-19 pandemic was the root cause of this uptick in pension savings since March 2020, with reduced costs for travel and other expenses playing a big role in people being able to put more away for the future.

As the nation learned that working from home is a viable option for people in various fields and occupations due to the advancements of technology, Britons found themselves with extra cash to hand, as fewer costs drained their income.

Although this trend was started by the pandemic, it appears to have had a lasting impact on the attitudes of workers towards their pension saving, and now may be here to stay, even with the worst of the Covid crisis seemingly in the rear-view mirror.

Indeed, 15 percent of Britons say they plan to increase their contributions beyond what they were doing before the pandemic, now restrictions have ended. With just 18 percent of people expecting to work full time in the office over the next 6-12 months, this trend could well continue into the future as the work from home revolution rolls on.

For many people, the COVID-19 pandemic has led to increased engagement with their pensions, with a third saying it has made them take their pension planning more seriously. Encouragingly, this impact has been felt most significantly by younger people, with over half (51 percent) of those aged 18-34 saying they are now paying more attention to their pension.

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Britons seem to have used the time afforded them by the pandemic to educate themselves on pensions, with one in four people saying they used the extra time in various lockdowns to research their pension options.

Annabelle Williams, personal finance specialist, Nutmeg, commented: “COVID-19 has caused extra financial strain for many people, but 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.

“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.”

However, despite increased numbers of people allocating newfound savings towards their pension pots, significantly more people have used them elsewhere, highlighting the need to continue to stress the importance of retirement saving.

14 percent of people directed some of the additional savings into their pension pots. Those who did allocated an average of 36 percent of their total savings that were made as a result of working from home. This was the lowest proportion of all outcomes.

The most popular use of this extra cash was to put it into a savings account, with 42 percent of savings resulting from working from home being used this way. Investing these funds was also a strategy a lot of people tried, with 39 percent of funds put into investments.

The third-biggest use of the new-found savings was to simply keep them in a current account, with 38 percent allocated to this. Plenty of people used their savings to pay off any outstanding liabilities as well, as 37 percent of funds were allocated to paying off existing debts and loans.

Equally, more people decided to simply spend their additional cash rather than keep it safe for the future, with 37 percent of new savings being spent. Ms Williams explained that people should get the most of this extra money and explore the best way to utilise the funds, with a pension top-up being a potentially attractive option.

She said: “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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