#13 Don't put your pension off

by Jane Baker on 17 July 2009  |  1 comment
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It's time for unlucky 'what not to do with money' rule number 13.

It's time for unlucky 'what not to do with money' rule number 13.

#13 Don't put your pension off

I can illustrate my point with a few simple sums:

Who would you rather be?

Person A - let's call him William. William is 25 and he's going to be a good boy and save £50 a month into his pension for the next 40 years until he retires at 65

OR

Person B - let's call her Poppy. Poppy is 45 and she's decided it's about time she got her pension act together. She's going to save £100 a month for the next 20 years. She hopes to retire at 65, just like William.

William and Poppy will both save a total of £24,000. So, it doesn't matter, right?

Wrong.

At 65 lucky old William will have a pension worth over £48,000.

But poor old Poppy will only have a shade more than £33,000.

(Assuming both pensions grow at 7% a year with a 1% charge deducted)

It's called the miracle of compounding. In other words, the earlier you start investing the more time there is for you to boost your final return.  It's just like earning interest on interest in a savings account.

The end result = a bigger pension.

So, who would you rather be again?

No contest.