Michelle Jacobs started her wedding planning business ten years ago but doesn’t think she will retire “anytime soon” as she has a very small pension pot.
The 61-year-old from London told i: “I am proud that I’ve built such a successful business but have next-to-no pension, so sadly haven’t retired yet. Before I started the business, my husband had a retail business and I worked with him. We had our pension pots and lived an absolutely amazing lifestyle.”
The wedding planner and her husband believed that the business would “always be there” for them, and could sell it when the time came to retire. Sadly, in 2012, their firm, which was one of the largest franchise partners of Levi’s jeans, was liquidated and they lost everything.
“We had to sell our house and move into a rental property and cash out our pension pots so we could live. It was after this I decided to set up a wedding planning business, which provides us with enough to live on, but I haven’t been able to save for a pension,” she said.
Michelle is not the only one who wishes they had paid more mind to their retirement when they were younger.
New research shows retirees have £119,000 less in their pension savings than they expected by retirement age. Pensioners hoped to save £250,000 in their pension pot but on average ended up with just £113,000, a report by Standard Life said.
For Michelle, pensions have “always been” on her mind but she just “hasn’t had the opportunity” to save for one. From her business, Elegante by Michelle J, she earns around £75,000 a year which is enough to live on.
“I started building this business for income, so all the money goes to our expenses or is reinvested in the business. It’s a very successful one, I do talks internationally and people think I’ve been in the wedding industry for decades. But I haven’t got time to save for a pension as it takes years for a pot to grow.
“I worry about the future – not about next year because I know that I’ll be working on my business for the next ten years. If I’m not working in the future, I worry that we won’t have enough money to live on, or to pay our rent.”
Michelle said that she wishes she and her husband lived a more “frugal” life when they were younger, and spent time thinking about their retirement finances.
“We didn’t think hard enough about the future and that we’re all living. Now, I wish we hadn’t cashed in our pension pots, but we needed the money at the time. I wish we were more frugal when we were younger.
“We always lived in the moment and thought that the retail business would be successful – retirement was something to think about later.”
The research by Standard Life found that currently, a £250,000 pension pot would lead to a monthly income of £1,007 if retirement is taken at the age of 66. Meanwhile, retirement savings of £131,000 would lead to just £527 in monthly income.
As a result of under saving, retirees expressed their worries and regrets about their financial preparation for retirement.
Around 50 per cent of pensioners said they wished they thought more about their retirement finances at a younger age, while 54 per cent said they wished they saved more for their pension.
Meanwhile, 53 per cent wished they started saving earlier and 42 per cent of pensioners wished they should have sought advice or guidance to plan for their retirement.
Dean Butler, managing director for retail direct at Standard Life, said that it can be difficult to “work out how much you need to save to achieve your desired standard of living in retirement” especially at the start of a career.
He said: “Clearly there’s a big gap between what people hope to save, and what they actually do – this is unsurprising, particularly when looking at it during a cost-of-living crisis, however the result can be a significantly reduced standard of living in retirement.
“Access to affordable personalised advice and guidance is crucial to closing the gap – as things stand, way too few people feel able to get advice and we can see that people then regret not doing so.”
How to maximise your pensions savings
According to Standard Life, there are three ways people can make the most of their pension savings before they reach retirement age:
- Make sure you’re taking advantage of all the benefits of your pension plan and your employer offers. If your employer offers a matching scheme, where if you pay additional contributions your employer will match them, consider paying in the maximum amount your employer will match to get the most out of it.
- Getting a bonus this year? Deciding to pay some or all of your bonus into your pension plan could save you paying some big tax and national insurance deductions. Meaning you could keep more of it in the long run, and it could be a great way to give your pension savings a boost.
- Even a small amount could make a big difference in the long term, especially if you’re starting young. If you’re able to, think about paying a little more into your pension when you get a pay rise or have a little extra savings.