How to fix a pension shortfall

Not saved enough for a decent pension? There are four ways to get round this. Save more, spend less, work longer.

That's only three.

No-one ever mentions the fourth.

Which is?

Die young.

I prefer the other alternatives.

Very well - lets go through them: save more.  This strategy has a bonus side effect. Suppose you want to retire on two-thirds of your salary. You increase  your savings as much as you can - say up to one-third of your salary. So when you finally retire on two-thirds your net spendable income doesn't go down at all. It might actually go up as you won't be paying national insurance.

Spending less has a big impact. Cut back by £4.50/day - every day for the rest of your life as a pensioner- and you can knock £50 000 off your required pensions saving.* Sure you will miss that coffee and croissant, or the odd liqueur, but how long would you have have had to work to save an extra £50 000?

Working longer. Not only will your savings keep going up, you will also get more for your money when you turn it into a pension.

Because?

Because by retiring late you have less long to ...

OK I get the picture.

*Who would have thought cutting out a large cappuccino and a cream doughnut would save you £50 000.  But divide by 25 and  the resulting £2000 a year then turns into £1600 a year after tax. £4.50/day. Pensions seem absurdly expensive, but the flip side is that the naturally frugal can retire years before the rest of us.