Retirement planning: An expert shares the “secret” of pensions | Personal finance | Finance

On his YouTube channel, financial planner Pete Matthew suggested how people who worry about “not having enough” can actually save for retirement and make a huge difference. He shares his strategy on how Britons can retire with over £250,000 by using their work schemes and prioritizing saving for the future.

Mr Matthew said: “Now you can take small steps that can make a huge difference in a surprisingly short time.

“A lot of people worry that they don’t have enough at all and maybe that’s you.

“But first remember it’s never too late to make a big difference to your future.”

For people who haven’t started saving for retirement, or haven’t saved much in their 50s, he said “focus.”

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He suggested that people should have a target to aim for.

The British would have to calculate how much it would cost them to live day to day. Each month, they have to calculate a figure in order to have an annual total.

People have to add up all the income they will receive once they reach state pension age to see if they cover the monthly amounts they need – this can include income from state pension, pensions defined benefit or defined contribution pensions.

Mr Matthew also suggested finding ‘non-retirement stuff’ such as bank accounts, investments, ISAs, premium bonds, equity in the house.


All of these things are assets, so people need to know what the total amount is.

He said: ‘Let’s say you need £22,000 a year and all your pension income is £12,000. You will need to build up assets to provide you with the difference – £10,000.

“Now, as a very simple rule of thumb for determining how much we need for retirement, we multiply our annual goal by 25. So 10,000 times 25 equals 250,000.

“It may seem impossible, but if you’re 50 and have no assets, it’s doable if you’re willing to work really hard.”

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He said once the figure is calculated, people should “get started”.

To hit the £250,000 target, Mr Matthew suggests regular increases and the use of employer contributions.

If people can set aside £250 a month, that’s £3,000 a year. If well invested, individuals can earn a return of 6%. Over 17 years they could end up with £89,716.

Mr Matthew continued: “If we increase the amount we save each year by 5%, our £250 a month will become £264 a month. In 17 years we end up with £127,439. Much closer to our goal.

“By increasing it by 10% each year, we will end up with £187,754. But here’s the magic touch if you’re an employee working for someone else.

“The secret to pensions is tax relief and if you’re an employee you can also ask your employer to contribute.”

He explained that if people pay £250 into their occupational pension from their wages, they will save £50 in tax, so it will only cost them £200 to contribute £250 a month to it.

Employers can also match what an employee contributes. “You don’t know if you don’t ask,” he added.

If they match the contributions, that’s £500 a month saved. With investments growing at 6% and increasing by 5% each year, people can end up with £254,879 after 17 years, he explained.

Mr Matthew continued: ‘See, we have achieved our goal and all we have done is use the power of other people’s money, tax breaks and your employer’s contributions and interest, and small regular increases to increase the number. The goal in retirement is to get you to a point where you won’t have to work anymore because you can live on other income and assets.

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