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Boost the State Pension deficit! How I’m preparing for my financial future

Kirsteen Mackay
·3-min read
Retirement saving and pension planning
Retirement saving and pension planning

The State Pension leaves a lot to be desired. Studies have shown that it’s barely enough for anyone to live on, and certainly not with any level of comfort. The trouble is, few people realise this until it’s too late. Thankfully, that need not be the case. By investing every month, I think it’s possible to boost the State Pension deficit and create a worry-free financial future.

Take responsibility

Most people put some thought into what they want out of life. Whether it be a career path, family, car choice or hobbies. But very few of us daydream about our senior years. The next decade or two, maybe, but past that, not so much.

Planning and imagining our retirement years seems so far in the distant future, that it can creep up with no forethought, and suddenly all those hopes and dreams are over with a turbulent bump. Decades ago, it might have been because we thought we’d be lucky to live past 60, but nowadays the average UK life expectancy is over 80 and one scientist thinks the first human to live to 200 has already been born. Now that’s a scary thought!

We are responsible for our own financial futures. There’s no getting away from this. Unless using a professional to take care of things for us, we must take control to ensure our future lifestyles are as we desire. For most of us, the added cost of paying a professional is out of reach, so we must start planning for ourselves.

Boost the State Pension and live in comfort

The State Pension deficit gap is the difference between the amount I’ll receive and the amount I’d like to live comfortably. At the moment, I’m projected to receive £175.20 a week. But I’d like to receive at least double that, so around £350 a week. That means the deficit for me is currently £761 per month or £9,141 per year. If I want to plan to have that for 20 years from age 68 to 88, then I need to find an additional £182,820.

By committing to investing £250 a month for the next 27 years, at an effective annual interest rate of just 5.6%, I’d end up with £185,104. So, doubling my State Pension and beating the deficit is really not as difficult as it may seem. The higher the interest rate achieved, the more money invested, or the longer it can be left, all point to a much larger sum ultimately being achieved.

Tax efficiency

Investing within a Self-Invested Personal Pension (SIPP) or a Stocks and Shares ISA provides a tax-efficient way to protect investments. I think it’s a great way to take the plunge into protecting my financial future. It also allows me the fun of getting involved in stock market investing.

The post Boost the State Pension deficit! How I’m preparing for my financial future appeared first on The Motley Fool UK.

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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020