Podcast: Julian Webb – are you saving enough for your pension?

The Property Week Podcast

When it comes to choosing what you spend your hard-earned money on, top contenders are likely to include clothes, a car, your home or an evening out.

Pensions are often way down the list. However, as Julian Webb, Fidelity International’s head of defined contributions and platform sales, said in this month’s Property Week podcast, pensions are becoming more vital than ever.

With people living longer, the age at which you can claim a state pension is being pushed further up. Meanwhile, global economic turmoil means that choosing the right type of pension is critical.

Not saving enough or in the right way could mean the difference between cruising around the Med or struggling to pay the electricity bills during retirement. So how much should you be saving? As a rough guide, Webb recommends halving your age and then contributing that percentage of your salary to your pension — for example, if you are 30 then you should contribute 15% of your salary.

Someone who did this from an early age would have a pension worth two-thirds of their current salary if they retired at 65. You should also find out how your pension is being invested. The chances are — especially if you work for a large company — that you will be contributing towards a defined contribution salary pension, rather than the defined benefit salary pensions of yesteryear.

The difference between the two is that a defined benefit salary pension promises to pay out a set sum every year after retirement, which is guaranteed by your employer. With a defined contribution pension, the amount you and your employer contribute is invested.

A downside of the latter is that if, for example, your pension was heavily invested in equities when you neared retirement age and the market turned, your pension could take a
big hit. The turbulence in the equities markets over the past few weeks, could have wiped up to 20% off the value of pensions.

“The key thing is to understand exactly where your pension is invested,” Webb says. “I was reading the other day that people spend more time choosing their new car than they spend looking at their pensions and planning for their retirement.

“A younger person can invest more in equities in a bid to boost their pension, but when you get closer to retirement age you need to be more risk averse, investing in bonds and cash,” he adds.

A person with a “medium attitude” would ideally invest about 50% in equities, 35% in bonds and cash and 15% into property, Webb suggests.

To hear more on how to manage your pension, go to propertyweek.com/podcast or search for Property Week on iTunes.

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