March 22 2013.

We are living longer, which means spending longer in retirement - but too few people are adjusting their saving habits accordingly. Adam Berstein explains how to plan for financial security.

In a recent survey by the National Association of Pension Funds, 60 per cent of those interviewed had not thought about the potential length of their retirement that would need to be financed. One in four aged between 50 and 64 needed to save an extra £60,000 before retirement to realise the income they would need or expect.

A pension is a tax-efficient method of deferring income that, through investment, should grow. Clearly, smaller amounts regularly paid over a longer period of time will be more rewarding and less painful on the pocket compared to the efforts required of late starters. Hargreaves Lansdown offers the example of a 22-year-old saving 10 per cent of a £26,000 salary. With six per cent growth in the investment, a pension pot of £523,000 will be realised. Starting at age 30, the pot would only be £313,000 and starting at age 40 the pot would be a paltry £156,000.

Both employers and employees need to be aware of pension autoenrolment. It's a change in the law that is being rolled out over the next five years that affects those aged over 22 earning (at present) more than £8,105 a year. Those affected will be automatically enrolled into a workplace pension where employers will need to contribute at least three per cent of employee earnings. Employees can opt out if they want to. By February 2018, all employers and employees will be part of the scheme. More information is available from the Department for Work and Pensions at  

To read the full story, turn to page 40 of the current March issue of Motorcycle Trader magazine or CLICK HERE to read the digital version.