How to ensure your pension isn’t leaking

The phone rings.

It’s your daughter, panic in her voice, “I need some help. My car has broken down and it’s £300 to repair. I can’t afford that and I don’t know what to do.”

You tell her not to worry; you’ll put the money in her account with a little extra for the next bill.

Later that afternoon, the phone rings again. This time it’s your mother. She won’t ask you for money directly but after hearing that the mortgage is going to be a challenge this month because the boiler needed replacing, you know that your parents need some help.

You reassure her that you’ll help them out with the payment.

As you hang up, your mind starts throwing numbers around, haphazardly trying to work out what you are handing out and what you can really afford.

With your own retirement less than 10 years away you’d planned to save as much as you can so you’d have enough money when you stop working. Instead, it feels like there’s always something stopping you.

Unable to concentrate, you get out your bank statements, switch off the TV and try to get some clarity on the numbers.

When you see the total, your stomach churns.

This year alone you’ve helped your parents and daughter out to the tune of £7,300.

You don’t resent it; you just don’t know how long you’ll be able to afford it.

You know that to have a good lifestyle in retirement you need to clear the mortgage and boost your pension. Neither of these seem possible when you’re down over £7,000.

With a sigh, you slump back in your chair and think about the situation.

Cutting everyone off hardly seems fair, how will they get by? But if I keep going like this I’m going to need support as well, and who can I depend on for that? And if I run out of money, I definitely can’t help anyone.

Being the Bank of Mum and Dad can feel like a big responsibility. Should it cost you your own security, though?

This is the reality for many

You’re not alone in this situation. In September we conducted a survey of 1,500 people asking how many are supporting their family in some way.

A third of people are giving up to £5,000 a year to their children in small and irregular payments. Others help out with weddings and getting onto the property ladder.

And of the respondents who are giving money to their parents, about a third pay £10,000 or more a year to help them stay afloat, including covering day-to-day living costs and care home bills.

All in all, the Bank of Mum and Dad is spending a lot of money.

Being so generous is certainly noble, but can you truly afford it? Giving away £15,000 a year would put a serious dent in most people’s savings, and the true cost could be your own financial concerns down the line.

And while it may not seem like it, looking after yourself first can ultimately benefit the rest of the family too. Why? Because they won’t have to worry about looking after you. Give away too much money and both you and your family will need each other’s support – and no one will be able to offer any.

There’s still time to make a difference

If you’re struggling to put more money into your pension right now, one thing you can do is make sure the savings you already have are working hard for you. That will ensure you have more money when you retire, whether that’s to look after yourself or to help family members who need it.

Why is looking after the savings you already have important? Consider this analogy.

You’re filling up a bucket, and notice it’s leaking. The bucket is still filling up, but water is slowly leaking out and if left long enough most of the water will drain out.

Do you carry on filling it or use a different bucket?

Unless you happen to enjoy standing at the sink refilling buckets the chances are you’d find a different one without a leak.

Well, it’s similar with your pension. Each year you pay fees, and they aren’t all the same. Many older schemes in particular are very expensive, and this drains your savings like the hole in the bucket drains water.

It’s important to save more when you can, but it’s also important that the savings you already have are working hard for you, not leaking out in unnecessary fees that could be costing you years’ worth of retirement income.

Best of all, it won’t cost you anything to find out if your pension could be improved as we only charge a fee if you ask us to act on our recommendation, and you’ll have peace of mind that your money is working hard for you.


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