Whether it’s for a mortgage or that dream holiday, there’s countless reasons why a person may save for the future. But, with many people hoping to retire around the age of 65, and life expectancy rising, it could be that a pension wealth is more important than ever. According to the report ‘Independent Review of the State Pension Age: Smoothing the Transition’, by 2050, 56,000 people could expect to live to 100. And, in order to withdraw £20,000 for these 35 years, senior analysts at AJ Bell have suggested that they’d need a pension fund worth £447,000.
I just got into my head that I couldn’t afford the £100 worth of pension contributions when I started… But I think I changed my mind part way through
This figure isn’t far off the amount that Lynn James, 42, is hoping to amass.
At the age of 42, the founder and managing director of personal finance and lifestyle brand Mrs Mummypenny currently has a pension pot of around £50,000.
And, if she doesn’t make any more contributions, this could mean she ends up getting around £30 per week.
The qualified ACMA management accountant left the corporate world after 16 years, back in 2015, in order to set up her own business.
Now, she’s making every effort to improve her pension wealth.
Meanwhile, men’s pensions wealth is near £156,500 – meaning women are, on average, £105,100 worse-off.
This is despite the fact that women generally live 3.7 years longer than men, requiring them to save five to seven per cent more than men in order to draw the same income throughout their later years.
Mrs James, who spoke on a panel at the event, sat down with Express.co.uk, to explain her savings journey – which she hopes will see her amass a £500,000 pension.
Lives: In Hertfordshire
Pension wealth: £50,000
Pension wealth aim: £500,000
Current occupation: Founder and managing director of lifestyle brand Mrs Mummypenny
Children: The breadwinner for her family, Lynn is the mother of Dylan, 11, Josh, nine, and Jack six.
In 1999, Mrs James graduated from university, going on to begin work.
At the time, aged 22, her employer didn’t offer a pensions policy to employees under the age of 25, giving her no option to start saving in a workplace pension.
“Then, when I turned 25, I felt I couldn’t afford it so I just didn’t opt in,” she recalled.
Following her accountancy exams, Mrs James qualified as an accountant. She switched to a new company, securing a pay rise.
At this point of her life, while approaching her later 20s, she wasn’t sure that £100 of contributions was something she could spare each month.
“I just got into my head that I couldn’t afford the £100 worth of pension contributions when I started,” she explained. “But I think I changed my mind part way through.”
During this time, Mrs James became pregnant with her first child.
With both herself and her employer’s pension contributions, Mrs James said: “I was on an alright salary so it was building up nicely, but I ended up taking voluntary redundancy, and as part of the voluntary redundancy I cashed in my pension.”
Cashing in her pension is something which she’s only uncovered recently, after a pension provider carried out research into her employment history.
“No advice. I had no advice,” she said. “I ended up with, I think about £30,000 of money that was given to me for leaving, compromise agreement, and pension money, and some shares.”
Pension contributions: Lynn James is the founder and managing director of Mrs MummyPenny
After maternity leave and a career break totalling 18 months, Mrs James returned to work.
Her work with this company lasted for a year, with the firm later going bust.
“I worked for them for a year,” she said. “I did contribute some money into the pension scheme there and that created about £10,000 worth of a pension pot. And even though they went bust nothing was impacted.”
Mrs James then had her second child, Josh. After nine months maternity leave, she worked for a fourth company – and apart from on maternity leave, she made regular workplace pension contributions.
Here, she built up around £30,000 worth of pension savings.
Fast forward to 2015, Mrs James left the corporate world, in order to set up Mrs Mummypenny.
She also worked with the pension provider PensionBee, who took a look at her different pension pots.
“The fees were horrendous…”
“We worked out that the fees were horrendous,” she remembered. “I wasn’t getting a very good return, we went through all the sensible stuff, and they then transferred it all over to them.
“Now I’ve got all the money sat in a consolidated pot which I can contribute to whenever I choose, and because I’m now freelance or run my own company, I can choose when to put money into that pension pot.”
With her new company getting off the ground, Mrs James explained that pension contributions for the first three years just weren’t something she could afford.
“My income wasn’t smooth enough – you know it could vary by thousands each month,” she said.
Now in her fourth year, Mrs James is looking to boost her pension wealth, by contributing sums of money each month – with this being 10 per cent of her turnover.
“As my pension stands right now, if I was to look at the valuation, it’s only worth £50,000, so I am having to put really big chunks of money into my pension now,” she said, before explaining that a pension worth £500,000 is her current aim.
“So I’ve got a long way to go,” she said.
What was it like discovering that she would have around £30 per week come retirement with her current pension wealth?
Pension contributions: Lynn James is looking to boost her £50,000 pension pot to a £500,000 fund
Pension contributions: Lynn James is a personal finance blogger
Mrs James paused to remember. It was a moment where she thought, “‘I’ve really messed things up,” she said.
That’s not to say that her hopes of a comfortable retirement have been dashed.
“At least I have a pot – there’s a lot of people that don’t have a pot,” she said. “But, now is the time to take action, and start adding to it. So that’s why I’m having to put big chunks.”
“It’s a bit of a challenge,” she admits. But, at the age of 42, Mrs James has worked out that she has around 13 to 15 years to make the contributions before she accesses the fund.
So, what’s her savings aim?
“Ideally so I’m trying to build an asset pot of a million pounds, which doesn’t include property,” she said.
“Because stocks and shares ISAs are for medium-term, pensions are for long-term, I want those two pots to add up to a million pounds because then, I would be financially independent which means that I don’t have to work if I don’t want to.
“I just want to have that choice. Oh, and I want to pay off my mortgage. It’s how you balance that.”
“Learn to pay yourself first…”
What words of wisdom does the personal finance blogger have for others?
“Start as you mean to go on,” she said. “If only, from the age of 22 when I got that first pay check, I had put 10 per cent of that into a stocks and shares ISA, 10 per cent of that into a pension. From day dot so I never knew any different.
She added: “So, learn to pay yourself first, and save some money from the beginning.”
But that’s not to say that she doesn’t think earners should direct all spare income into savings.
“I’ve got a real mindset of you have to enjoy your life and experience,” she said.
“Don’t necessarily spend lots of money on loads of material goods, but at least travel the world and eat amazing food and whatever floats your boat.
“But also be balanced, and put money aside for the future as well.
“I think you can do both, but you’re going to have to be prepared to make cutbacks elsewhere.”