PLANNING
What you should be doing
in your 20s & 30s
All UK companies of 30 people or more must now automatically enrol their
employees in a pension scheme.
However, many employees are paying in the bare
minimum of 0.8 per cent of qualifying earnings, with
the employer obliged to pay an additional 1 per cent.
Although the minimum contribution figures will rise
in the future, at the current levels they are unlikely
to be anywhere near enough and you may wish to
think about contributing more or opening a
separate pension.
In terms of your portfolio objectives at this stage, the
only thing that should be on your mind is growth.
The large amount of time you have at your disposal
before you retire – typically between 30 and 45 years
– means you can take on a reasonably large amount
of risk in order to maximise returns. If your company is
signed up to NEST, for example, the scheme offers a
product called the Higher Risk Fund that may be
suitable for you at this stage of your life.
If you decide to take more control over your pension,
for example through a SIPP, it is important to
remember that your lengthy time horizon does not
mean you can afford to forget well-established tenets
of investment wisdom such as diversification.
It simply means you can increase your exposure to
areas of the market that traditionally offer a higher risk/
reward trade-off.
As a result, your portfolio should be almost entirely
invested in equities, with a larger-than-usual exposure
to high-growth sectors such as smaller companies and
emerging markets. Trustnet Direct’s Accumulator
Portfolio is designed for people at this stage of their
retirement saving:
https://www.trustnetdirect.com/fund/help-mechoose#!helpMeChooseID_5_accumulator
Key points
Starting to save early has a big impact on
your retirement pot when you are older
You can afford to take larger risks, with the
potential for higher returns, due to the
length of time you are investing for
We understand there are many things
competing for your disposable income,
including buying a house, but try to get into
the saving habit
The Pint of Beer a Day Stor y
=£5 x30 days = £150 per month =£1,800 per year
If you invest this every year from 25 years old (and increase your contributions by just 5% each year):
At age 65 you’d have saved
or you could have drunk
14,440 pints
£479,207*
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