These seven pension mistakes could destroy your retirement

It may seem like stating the obvious, but the sooner you start saving for retirement, the better your chances of putting together a decent sum. If you save £100 a month from age 25, you will have £196,857 by 65, assuming your money grows at an average 6% a year. If you delay until 35, you will have just £100,562, even with the same growth rate. That’s half the amount, even though you delayed for just 10 years. Your early contributions are the most important because they have much longer to grow.

The auto-enrolment scheme has given millions of employees a pension for the first time. If you pay in 4% of salary, your employer must contribute at least 3%, and tax relief adds another 1%, effectively doubling your contribution. Resist the temptation to opt out, as you are effectively turning down free money and will regret it one day.

Instead of saving money regularly, some people cross their fingers and hope something turns up. Some dream of a big inheritance. Others pin their hopes on winning the lottery or becoming rich and famous in some unknown way. Don't bank on it. If the windfall doesn’t come through, you’re in trouble.

Most workers now move from job regularly and collect pension pots along the way, some of which end up lost. It is estimated that around 1.6 million pensions worth £19.4 billion online lie unclaimed, worth an average £13,000 each. Pull together all of your paperwork and put it somewhere safe. If any have schemes gone astray, contact the Pension Tracing Service. 

All pension schemes have different charges, and this could make a huge difference to what you finally end up with. If you have £100,000 in a pension charging 2% a year, and it grows at 6% a year, you will have £324,340 after 30 years. If your pension charges just 1% instead, you’ll have £432,194 – that’s an extra £107,854. That 1% charging difference has cost you a six-figure sum.

Savers can now draw money from their pensions from age 55, but be careful about taking withdrawals too early. That money has to last the rest of your life, which could mean another 30 years or more. If you deplete your pot too soon, your later years could be a struggle. 

Online pension scammers are dreaming up ever more cunning tricks to dupe people out of their lifetime savings. If you fall victim, your retirement could be in tatters. Avoid anybody offering get-rich-quick schemes. If something sounds too good to be true, it is.

If you need expert advice or help and support with your pension and retirement planning from a trustworthy source, contact Unbiased today.

Read more: How to be smart when saving for retirement

Read more: What's the best way to save for retirement?

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