My simple trick to ‘boost’ savings and turn just £180 into £44,000 – but you need to act now
SAVVY savers could benefit from an extra £44,000 if they start watching their small change at a young age.
Pensions expert Robert Cochran has revealed an easy hack you could use to boost your pension by £44,000 and you will barely notice the money leaving your account.
Data collected by Lloyds Banks shows that someone who rounded up their purchases and put this into a pension could have around £44,000 by retirement age.
The average person saves around £180 through Lloyd’s Save the Change challenge which rounds up day-to-day spending and collects it as savings.
If that £180 was paid into a pension it would immediately get a tax benefit and you'd see £225 per year invested rather than £180.
If you start doing this from 20 years of age and retire at 65 you would have saved £44,414, as 30 year old would have £25,071 in the same time, a 40-year-old £13,083 and a 50-year-old 35,827.
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The calculations assume the amount saved goes up by 2.5% per year and that the growth of the fund is at 4% after charges.
But it just goes to show that even saving a small amount of money sooner rather than later for retirement can make a big difference.
Robert Cochran, pensions expert at Lloyds Bank, said: “While most people will be saving into their pension monthly, either through their employer or into a personal pension, using initiatives like Save the Change can boost their pot even further.
As little as £180 a year, which is the average saved by our customers through Save the Change on their day-to-day transactions, can make a real difference to people’s pension pot when they come to retire.
“Saving early and regularly even small amounts can end up having a big impact - the most important thing is to get in the habit early.”
Other pensions experts agree that the best way to build a good retirement fund Helen Morrisey head of retirement analysis at Hargreaves Lansdown says you should drip-feed your pension contributions.
She explains: “Pensions are a long-term game and contributing even small amounts can really help build up your pension.
“Retirement can feel like a long way away but it is precisely the long-term drip feed of contributions over time combined with investment growth that can help you enjoy a good retirement so it really pays to start early.
“The extra boosts that come with pension tax relief and the employer contribution if you get one provide an extra incentive and watching your pension grow over time will help you face your retirement planning with much more confidence.”
The data comes as Lloyds has launched a Ready-Made Pension which is a digital-first product which has been designed to make saving for retirement simpler, whether someone is combining multiple pensions or opening their first pot.
The new product will be available initially to customers who bank with Lloyds Bank, Halifax or Bank of Scotland.
Users will be able to access the new feature via their banking mobile app or online.
They will be able to consolidate up to 10 pension pots and have a pension created for them which is tailored to their age and retirement plans, managed by experts and enables them to track contributions and make changes at any point.
Customers can open a Ready-Made Pension with a minimum cash investment of £5,000 or set up monthly contributions from as little as £150 a month and can transfer in existing pensions from £10,000 upwards.
What are the fees on the Ready-Made Pension?
Lloyds Ready-Made Pensions will have an annual account fee of 0.3% or a minimum of £5 a month.
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Ongoing investment charges are set and 0.24% and there is a transaction cost of 0.14%.
There are no drawdowns or exit fees with this feature.
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