Updated: Aug 22, 2020
So, you've got yourself a dinosaur account, but how much should you be putting into it?
If you're a young person reading this - literally, not just at heart - you're in luck! Because the younger you start saving into your pension, the less you'll have to put in (on a yearly basis). This is due to the eighth wonder of the world (as coined by Einstein), which #spoileralert is not King Kong.
For most people, compound interest (basically earning interest on your interest, or racks on racks on racks as Yung Chris would say) was tossed into their brain bin along with algebra and trigonometry the moment they left school. But it's super important when it comes to long term saving because it means that your money grows naturally over time, so the earlier you start saving, the less you need to save.
As a rough rule of thumb, you should be saving half your age (at the point you start contributing) as a percentage of your salary each year into your pension until you retire (i.e. if you start saving at the age of 20, you only have to contribute 10% of your salary each year into your pension, whereas if you start saving at the age of 30, you have to contribute 15% of your salary each year).
Clearly this is very simplistic, and the amount you contribute will depend on the lifestyle you want to have at retirement, which is why Aviva have created this sweet ass tool that asks you a number of questions such as: what type of house you want to live in; where you want to go on holiday; and how often you want to partake in OAP-friendly activities. It uses your answers to calculate how much you should be saving to be able to afford this lifestyle - and shatters your dreams of living in a mansion.
What I found really shocking about this is how much the percentage you should be contributing increases with each year you lower your retirement age by - which has completely ruined my plans of retiring at 30.
The earlier you start saving into your dinosaur account, the less you'll have to put in each year and the more boujee your retirement will be. If you're unsure how much you should be saving, I'd really recommend using Aviva's tool - it's a real eye-opener!
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Now for the serious part: my blogs are for educational purposes only; they do not constitute financial advice. Please consult with an independent financial advisor for advice on your specific circumstances.