Pension Savings: Are You a Speedboat or Driftwood? It Seems We All Fall into One of Four 'Nautical' Groups in Retirement Planning. So Find out If You're Shipshape
Byline: Jo Thornhill
When it comes to saving your pension, are you speedboat or a piece driftwood? It may seem bizarre question but Iain Naismith, pensions expert at insurer Scottish Widows, says that most people fit into one four 'nautical' categories when comes to saving for retirement.
At one end are the high-powered speedboats - they know where they want to get to and are getting there the most efficient route.
At the other, there are the pieces driftwood bobbing along and at risk being stuck on the first sandbar.
Only the most purposeful savers, speedboats, have the chance of a comfortable retirement. Driftwood, unsurprisingly, face an old age spent hardship. But the category you fit into isn't only about how much you earn - so what type of saver are you?
THESE workers are putting away the highest proportion of their monthly salary into a pension - at least 12 per cent - and are also making other long-term savings in tax-free Isas, bonds and deposit accounts. Diversifying like this reduces risk.
But surprisingly, these prudent savers are not always the highest earners. Solid saving has as much to do with attitude as income, it seems. Naismith says speedboats are more likely to be characterised by steady employment - staying with the same company for many years - than a big pay packet. One-third of savers in this category earn [pounds sterling]20,000 or less. The lucky ones may have a final salary pension through their employer, for example public sector workers. They are also likely to be older, with more than half in this group over 50.
'Speedboats often work in the public sector or for large organisations and have excellent pension arrangements with the employer contributing,' says Naismith.
'They generally stay in their role for a relatively long time. They are primarily male, married and may no longer have children who are financially dependent.'
Public relations director Marie-Louise Burman, 34, and her husband, Lee, 35, an investment banker, are younger than the average speedboats but fit the criteria in other respects. They save about ten to 15 per cent of their monthly disposable income on top of their individual company pension schemes.
The couple, who live in Petts Wood, south-east London, with their two-year-old son, Oliver, are determined they won't be working into old age. This, they say, spurs them to save hard.
Marie-Louise says: 'My father was a victim of the Equitable Life scandal so he instilled in me the importance of not having all your eggs in one basket. Lee and I have a number of pensions, from previous jobs, but we have not consolidated them, so we spread the risk across different companies. We also have a range of Isas and other savings accounts.'
ADVICE: While saving 12 per cent of salary should ensure a comfortable retirement it won't necessarily fund a luxurious one. Saving an extra four per cent from age 30 could boost a pension pot by ten per cent. This could help pay for some luxuries.
SAVERS in this category are making headway with their retirement planning but are not wholly in control. This group saves between six and 12 per cent of their salary. While this is a good start, it is not enough to fund a comfortable retirement.
By way of example, a worker aged 40 earning [pounds sterling]35,000 a year would have a pension pot worth about [pounds sterling]100,000 by 65, assuming contributions of six per cent of salary a year and investment growth of seven per cent. That pot would buy an indexlinked retirement income of about [pounds sterling]4,000 a year.
About one-fifth of the population is in this category and two-thirds of the group are aged between 30 and 49. They tend to be mid-level earners working for private sector companies and have a mortgage and other debts.
Andy Crisp, 34, from Highbury, north London, is the archetypal sailing boat. …