While lockdown might have played havoc with your social life, recent data reveals it could have boosted your finances. According to a recent report by the Times, households in Britain saved more than £100 extra a week during the pandemic as the opportunity to socialise and spend money dropped.
It explains that the Office for National Statistics found that, in the 12 months leading up to March 2021, households reduced their spending by an average of £109.10 a week. When you consider this equates to £5,673 a year, it’s not surprising that This is Money has reported that the Bank of England estimates Britons have saved nearly £200 billion since Covid began.
Key to these savings, according to research by wealth firm Nutmeg, could be due to the savings in travel costs as people had to swap the daily commute for home working. The research also found that one in seven of those asked intended to use the savings to boost their pension.
So, could switching your savings into your pension help you retire earlier? If so, how could you boost your pension even if you have to return to the office?
Not commuting means you could be saving nearly £3,000
According to Nutmeg’s study, Britons saved an average of £241 a month by working from home. This is thanks to reduced fuel and transport costs, and even money saved by not having to buy lunch at the office.
When you consider the cost of fuel, public transport and vehicle maintenance, it’s easy to see why you could be saving significant amounts of money over a year. Add to this a morning “coffee to go” and expensive sandwiches at lunchtime, and you can soon see your expenditure escalate if you travel to an office.
The savings you make by not spending this money could allow you to clear credit card bills, boost your emergency fund or increase contributions to your pension.
Putting the money you save into a pension could be a shrewd move
Of those questioned by Nutmeg, 14% said they intended to use all or some of the money they had saved to increase pension contributions. The wealth provider found that, on average, people would pay £128 a month extra into their retirement fund, which would mean an additional £1,536 a year.
Nutmeg claims that if you continued to make the additional £128 a month payment for 30 years, you could retire with an additional £170,000 in your retirement pot. The figure assumes investment growth of 5% per annum with Nutmeg fees, fund costs, and market spread into their totals.
It also assumes a 2% increase in contributions each year to counter inflation, and retirement after 30 years.
While this increase could provide more income and a better standard of living in retirement, it could instead allow you to retire five years earlier and live on your original target income.
If you return to the office, you might still be able to boost your pension
The BBC recently reported that 70% of people say they will never return to the office full time after the pandemic. This means you might be one of the 30% who has, or will be, returning to the office full time and, with it, the daily commute.
You might, on the other hand, have a flexi arrangement, meaning you will commute two or three days a week.
Whether full time or flexi, commuting again could negate or significantly reduce the savings you made while you were not travelling. It’s not all bad news though, as there may still be other ways to save money so that you can continue to boost your pension contributions.
Instead of buying expensive takeaway coffees and lunches, you could instead take in your own lunches and make your own beverage in the office. When you consider supermarket meal deals are typically £3 and a coffee on the go could be £2.50, you could save £16.50 if you travel to your office three times a week. If you commute full time, it could be a saving of £27.50 a week.
That could save you between £850 and £1,430 a year, which could help boost your pension.
In addition, you could cut your travel costs if you’re commuting to your office on a flexible basis as you might be able to buy a flexi transport ticket. This provides limited travel during a set timeframe for a reduced cost.
For example, the National Rail flexi season ticket allows you to travel for any 8 days in 28 days, at any time as long as it’s between two stations.
Even if you work in an office you may still be able to save money
As the above demonstrates, by looking at ways to reduce your expenditure when you go into the office you could save significant amounts that could then bolster your pension contributions.
This could improve your lifestyle when you retire, or allow you to stop working earlier than you thought possible.
Get in touch
If you would like to discuss retiring earlier by boosting your pension contributions, or your retirement plans more generally, please contact us. This can be done by emailing email@example.com or by calling us on 01785 876222.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). Your capital is at risk. The value of your investment (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.