A new outfit, a cup of coffee, pizza on a Friday night. They’re small, impulsive purchases, but they soon add up.
Research from Scottish Widows shows that each month, we each spend an average of £124 on things we could do without.
By swapping these ‘little luxuries’ for the simpler things in life, you could treat yourself to an extra £9,853 annual retirement income in your later years.
So, what are these ‘luxuries’, and how much do they cost us each week?
- Hobby equipment that never gets used: £2.18
- Using public transport for journeys within walking distance: £3.78
- Unnecessary taxi rides: £4.25
- Hot drinks from coffee shops: £6.95
- Disposable fashion: £7.88
- Ready meals: £10.87
- Shop-bought lunches: £11.78
- Snacks and sweets: £14.81
- Unnecessary takeaways: £16.82
- Nights out: £19.21
- Going out for dinner: £25.74
Each year, that adds up to £1,491.28.
(Source: Scottish Widows report)
Of course, we’re not suggesting that you forgo everything that makes you happy, but even cutting down on a few ‘luxuries’ could give you extra money to boost your retirement savings.
Most intend to save more
32% of people say that they are already saving as much as possible, but with 12% admitting that they never keep track of their incidental spending habits, it is estimated that many of us underestimate how much we spend on ‘little luxuries’ by approximately £74 each month.
62% of people plan to set themselves a financial goal for 2018, of those:
- 28% want to spend less
- 45% want to save more
Overall, 33% of us cut back on spending in January, with each person holding back £109.03 over the month. Just one quarter put this money into savings, whilst a third (30%) use it to pay debts.
If you are one of those who have promised to curb your spending habits over the next 12 months, why not consider some of the other ways you can use that £124, each week?
Better uses of your money
Auto-enrolment into workplace pensions has meant that over nine million people are now paying into a pension fund, with additional contributions made by their employer. (Source: DWP )
Currently, the minimum contributions made by both employees and their employers is 1% each. However, these will rise to:
- 2% employer and 3% employee contributions in April 2018
- 3% employer and 5% employee contributions in April 2019
Last September, Royal London reported fears that up to 30% of people could choose to opt out of their workplace pension once the minimum contributions rise. Updated research shows that it has fallen to 17%, which is positive. However, that still equates to around 160,000 people who will not have a pension fund.
With an ever-increasing State Pension Age that always seems to be just out of reach, workplace pension schemes are increasingly important. In addition to that, your employer is legally obliged to pay in their minimum contributions and you will also receive tax relief; so why pass up what is effectively free money toward your retirement?
Balancing luxuries and planning for the future
The biggest concern here, is that, rather than giving up the occasional takeaway or night out, people will choose to opt-out of their workplace pension to continue to enjoy those small luxuries. Of course, no-one can force you to use your money one way or the other. But, it might be worth considering just how important the coffee and ready meal you buy today, will feel in 30 or 40 years’ time.
Taking advice is always recommended. Research from Unbiased has shown that, those who seek independent financial advice could benefit from additional savings of £39 each week, which could lead to an extra £3,654 in annual retirement income in later life.
To discuss how you can boost your pension funds and prepare for your future lifestyle, contact us.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
Workplace pensions are regulated by The Pension Regulator