It’s no secret that the UK state pension fund is being stretched incredibly thin at present, with the Government’s advisory body suggesting that National Insurance (NI) contributions will need to increase by around 5% in the longer term.
However, given that British households are already being stretched by the economy, it seems unlikely that NI contributions can be increased further. Whether or not this situation will improve is likely to depend on the outcome of Brexit, and how well the economy adapts to whatever new circumstance it finds itself in.
These uncertain economic forecasts mean that in order to achieve a secure financial future, you must adopt a proactive approach. This will likely entail seeking out and considering as many viable ways of backing up your pension as possible.
Here are some potential options to keep in mind:
1. Open up Multiple Income Streams
If you want to fund your retirement and avoid working later in life, it’s important to you work harder and smarter when you’re younger. While this might sound like a no-brainer, a committed and robust approach is essential for growing your income.
This could mean opening up multiple income streams in your youth, including both active and passive sources of revenue. By opening up additional income streams sooner rather than later, they will have more time to mature into highly valuable financial assets.
You could consider combining a full-time salary with income from freelancing, for example, so long as you’re able to balance multiple job roles. Similarly, you could look to invest your accrued savings into various assets, so that you can create sustainable income alongside your earned salaries.
2. Reduce your Cost of Living
In the spirit of making sacrifices while you’re younger, it may be worth reducing your cost of living wherever possible.
This does not necessarily mean compromising on your standard of living, but it does require you to live within your fiscal means and minimise the amount of debt that you accrue through credit and loan agreements.
This way, you’ll be able to optimise the amount that you commit to savings, while also reducing your long-term debt burden.
This requires genuine focus and discipline, and you may find the process easier if you create a series of achievable long-term goals and use these as constant motivation.
3. Liaise with a Financial Planning Firm
While execution is crucial if you’re to back up your pension pot, long-term and strategic planning is also extremely important.
This is where expert financial planning firms such as Tilney can come into play, as they’ll work closely with clients to understand their real-time financial circumstances and create strategies that enable them to accomplish their objectives.
Companies of this type can also develop investment strategies for the future, while managing the distribution of your estate in the event of your passing.
This will require an initial financial investment, but this is a small price to pay if it translates into a healthy future return.