Never too young to plan for retirement

Q I left university six years ago, and apart from taking one year out to travel, I have been working for the past five years. I believe I have been doing well as I have been given pay rises over the past few years, and my boss has given me additional responsibility. I'm having a great time, enjoying life and just getting on with things.

David Emin is director of advertising at Mirror
David Emin is director of advertising at Mirror

 However, I recently went home for Sunday lunch and my father started having a go at me as he said I was making no plans for the future and I should be worrying about what happens when I get to his age. I'm only in my mid-20s and still paying off my student debts. Do I really need to worry about the future, and, if so, what should I do about it?

A  I'm a fair bit older than you and even I worry about the future. Only the other day I was wondering if I would still be having sex at 65. At the moment we live at 67, but I have heard a rumour going around that the neighbours might be moving.

Of course, you have to enjoy yourself while you are young, but at the same time you should start thinking about the future.

The future may seem a long way away right now, but you do need to make a provision for when you retire.
At some stage you will give up work, but you will need an income - and the sooner you start preparing for this, the better.

To put this into perspective: £1m saved in a pension pot in today's economy would give you an annual pension of about £30,000 when you retire.

You don't have to put aside that much, but unless you want to rely solely on a state pension, you need to start saving as soon as possible.

How much you save obviously depends on your lifestyle, but a benchmark is that you should pay 50% of your age.
So if you are 25, you should save 12.5% of your salary, and when you hit 30, you should think about putting away 15%.

There are no limits on how much you can save, but there are tax benefits to joining a pension scheme, which will further enhance your pension pot.

Your first port of call should be your company pension scheme, where you might find that your company will contribute towards your pension by matching your contributions.

Whatever you do, don't put off saving for a pension because you believe you will never need it. Sixty-five really isn't that far away - well, two doors away in my case. 

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