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Save early, it can make a huge difference!

If you are thinking about saving for your retirement, you have, at least started in the right direction. However, thinking about it is not really good enough. Putting off taking action, even for just a few years, could make a huge difference to your final fund when you eventually get to retirement age.

Let's take a look and see what the difference could be.

Here's the potential gross monthly retirement income (pension) you would get at age 65, investing £200 per month gross.

 *AegonUK, June 2011

Your £200 in effect only costs you £160 as the extra £40 comes from the government in the form of basic rate tax relief. If you are a higher rate tax payer, you can claim the extra relief form the HMRC on your yearly tax return or by asking your tax office to adjust your personal tax code. The higher rate is 40% on income up to £150,000 and 50% on income of £150,000 or more. Although the above figures show gross payments, pension payments are made paid net of tax at the rate specific to you.

 If you need a retirement income of £10,000 a year and you put off starting to save, you will need to pay more each month to achieve this goal when you eventually get around to saving. Have a look at this table:

Don't forget that inflation will reduce what you could buy in future with the amounts shown.

Source: AegonUK, June 2011

Why does a woman have to pay a higher monthly contribution into her retirement savings plan to get the same income as a man?

Simple, women are expected to live longer than men. In the example, the woman's final retirement fund needs to be larger to buy the same £10,000 of income in retirement.

Source: ONS, April 2011

If you would like to talk to us about your current pension arrangements or would like to set up a new personal pension plan, please give us a call on 0113 234 5528 or e-mail advice@prosperis.co.uk