Angela Murrell, private banking advisor, has a few rules for success: stick to your investment plan, start early, and make regular investments. These apply to investing in general, but also when preparing your pension scheme. “Invest regularly, even if you just invest small amounts,” she said. “If you invest every month, over 20 years a certain sum will come together.”
Murrell also highlighted the importance of starting early, underlining the fact that when you start putting money aside earlier, this results in a larger amount once you reach the age of retirement.
Another important thing is to avoid acting emotionally, especially in times when the markets are down, she added. You might be tempted to panic and sell everything, but it’s key to remain calm when faced with volatility. “The idea is to stay calm and just concentrate on your investment horizon and your plan,” she declared. “Stick to [your plan] and continue your investments.”
Things to think about when planning for retirement
Retirement is not a very common topic of discussion amongst family and friends who don’t work in the financial sector, Murrell noted. It really depends on the person--their age, their current financial situation and where they are in their life, for example.
“What has become more important in these last years is the work-life balance,” she mentioned. There are also some people who are interested in early retirement or gradual reduction of their working hours. Indeed, reduced working hours would allow people to ease into retirement while also giving them time to build up other personal interests or projects.
“Of course, there’s also the discussion on how to maintain your standard of living,” said the private banking advisor. There may be a gap between current revenue (while working) and the pension you would get in the future, making this an important point for people to consider when planning for their retirement.
Invest regularly, even if you just invest small amounts. If you invest every month, over 20 years a certain sum will come together.
An interesting point that Murrell brought up centred around parental leave. Women, depending on the situation with their kids, may not work during their entire professional life. And it’s becoming more common for men to take parental leave as well. “So during 10 years, you might just be working 80% or 70%. How much impact will that have on your future pension?” It’s an important thing to think about, she added.
Boosting interest in retirement planning
This is not such an easy question, said Murrell, when asked about steps to be implemented to increase interest in pension planning. However, she emphasised the importance of providing people with more information.
One of the issues you often hear about is that there might not be sufficient money in the pension fund for future generations, leading to people having to work longer before being able to retire. “I think what could be interesting is an objective, fact-based overview of the legal pension system, as well as what can probably be paid out in the future. This way, you have a clear idea of what you’re dealing with.”
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Another idea would be to put in place more early financial education, perhaps in schools, she added. This would encourage younger people to start thinking about their retirement. Additional tax benefits for putting aside capital for retirement--besides those that are already in place--could also encourage people to save more.
Personal preparations
Besides the legal pension and the amount that can be deducted fiscally as part of a private pension plan (€3,200), Murrell said it’s important to do something yourself if you have the opportunity. To prepare for her own retirement, she invests in a savings fund with the bank on a regular basis, following one of the rules for success mentioned earlier--continuous investment.
This is something that is also offered to clients: people can invest a certain amount into an equity fund every month. Over the next 20 to 30 years, if the stock markets go up, this can lead to capital gains and provide extra money for retirement.
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