(Image: Getty Images)
Finance experts have offered five tips to workers looking to boost their pension pots after a study revealed almost all age groups are failing to reach retirement fund targets.
Aviva's investment platform Wealthify claims its research revealed only Millennials' (25- 34-year-olds) retirement expectations match the predicted figure required for a 'moderate' retirement.
Pensions UK define a ‘moderate’ budget as including £59 per week on food shopping, one holiday abroad per year, and a three-year-old small car replaced every seven years.
They calculated this means £32,700 per year will be needed, yet every other age group is currently projected to have saved less by the time they finish working.
The study says even 45-54-year-olds are £312,110 short, while 55-65-year-olds are £269,356 short despite closing in on retirement age.
Wealthify says its survey found 16-17-year-olds expect to retire much earlier than older generations at an average age of 53 years old (52.6).
But, in contrast, recent Government figures reveal that the average age at which people choose to retire is on the rise - 65.7 for men and 64.5 for women.
Current 55-64-year-olds expect to retire at around 65 years old, which is more than 12 years older than the youngest age group’s prediction.
Pensions UK define a ‘moderate’ budget as including £59 per week on food shopping
(Image: Kennedy News/Wealthify)
These figures may serve as a cautionary tale for younger people, as almost two-thirds (62%) of 55-64-year-olds surveyed wish they had taken pensions more seriously when they were younger.
Jessie Kwok, who is chief investment officer at Wealthify, has explained five tips workers can explore if they're keen to boost their pension pots.
1. Start contributing early and regularly
Jessie said: "Begin paying into your pension as early as possible as this allows you to benefit from the long-term effect of compounding, effectively earning returns on your returns.
"This snowball effect could make a significant difference to the eventual size of your pot.
"Thanks to the power of compounding, even modest contributions can grow significantly over time.
"Based on typical long-term returns of 5–7% a year, an extra £100 invested today could be worth more than £400 after 30 years."
2. Increase contributions when you can
Jessie said: "Small percentage increases, particularly during a pay rise or bonus periods, can significantly boost your final pot without drastically affecting your take-home pay."
3. Consolidate old pension pots
Jessie said: "Tracing and consolidating old or lost pensions can make a big difference to your retirement planning.
"Many people have old workplace pensions they’ve lost track of, which means money is sitting in separate, harder-to-manage pots.
"By finding these pensions and bringing them together, you can reduce fees if the pension you consolidate into has a lower charge than your existing providers.
"It can also simplify your investments and get a clearer picture of your future retirement pot.
"It is not a one-size-fits-all process, as many older pensions have guarantees or benefits that could be lost if you combine them, so ensure you double-check them and any fees before consolidating.
"For many it's a smart step towards making your retirement planning easier and more efficient."
4. Consider investing to boost your pot
Jessie said: "Investing in a personal pension has the potential to grow your wealth over the long term when it's compared to cash savings.
"With many providers, a personal pension also gives you more control over your pension pot as you’re able to adjust contributions and monitor your pot’s progress.
"Investing offers potentially higher returns than cash savings, although performance varies and returns aren’t guaranteed."
5. Review your withdrawal strategy
Jessie said: "Understanding whether a pension drawdown, a pension annuity or a lump sum is right for you, or even mixing your options, can have a real effect on how long your pension lasts.
"Drawdown offers flexibility, while annuities provide guaranteed income. The right strategy depends on your risk appetite, health and your need for stable income."
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Wealthify was founded in 2016 and offers investment and savings products that can be managed in their app.
They warn that employers' contributions are one of the biggest advantages of a workplace pension.
It's explained that even opting out of receiving the minimum 3% employer contribution while on minimum wage could mean giving up around £743 a year in employer pension contributions.
Are you planning to change how you contribute to your pension? Let us know in the comments.