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Planning for the future

It’s never too early to think about savings goals and making the most of the money you can save

Read our top tips on making a financial plan for your future

Financial planning is like planning a journey – where you’re going and how you’re going to get there.

Now is a great time to make a financial plan and look at how saving for your retirement fits in with what else you want to achieve.

Here’s some tips on where to start.

1. Set some goals

Short-term goals
What you plan to do within the next year – perhaps a holiday, redecorate or treat yourself to something new.

Medium-term goals
What you plan to do in the next five years – like buy a new car, buy a new home, get married or have a child.

Long-term goals
What you plan to do in five or more years – maybe climb the property ladder, support your growing family or even looking further ahead to what you are aiming for in retirement.

2. Look at what you’ll need

This could be what you’ll need for a short-term goal, like a holiday, or it could be something bigger like buying a house or moving. It’s worth thinking what you’re going to need and how you’ll get there.

When it comes to retirement planning as part of this, sure, it’s a long way off but it’s worth looking at how that fits in with your other life goals, and what kind of retirement you’ll be looking to achieve in the future. The PLSA retirement living standards give you an estimate of the kind of income you’ll need when you retire, based on the lifestyle you want.

3. Look at what you’ve got

Here, we aren’t just talking about savings you have in your pension but where else you’re saving – and whether you’re saving enough. According to Unbiased, you should look to save between 5-20% of your monthly earnings towards your medium and long-term goals – but even saving a small amount can start to get you into that healthy savings habit.

When it comes to retirement saving, you’ve made a good start. You’re already paying in to the Retirement Income Builder, the defined benefit (DB) part of USS. This gives you a guaranteed income for life and a tax-free lump sum (subject to certain caps) when you retire. Every year you build a block of pension based on an accrual rate (1/75 of your salary, up to the salary threshold). The pension you build up is banked and increased in line with inflation (up to a certain amount), giving you an element of inflation protection.

You also have savings in the defined contribution (DC) part of USS, the Investment Builder, because you’ve either transferred a pension to USS, are making additional contributions or earn or have earned above the salary threshold.

As long as you’re paying in to USS, you get life cover too. Your beneficiaries may get a lump sum of three times your salary and a pension. So, your USS pension can help take care of loved ones should you die whilst paying in.

To get an estimate of what your pension might give you when you retire, log in to My USS and use the Benefit Calculator.

4. Do you need to save more?

Saving at these early career stages is about balance – maximising what you have now to achieve the lifestyle you want, whilst also getting into a healthy savings habit for the future.

It’s only natural that your short-term goals are more of a priority – but don’t forget about those medium and long-term goals.

If you don’t think you’re saving enough, it’s worth thinking about setting a monthly budget and goals for how much you want to save. The Money Advice Service’s budget planner is a good place to start.

It’s not just about saving the money though; it’s also about making sure you’re saving it where it will work it’s hardest for you, and that could be your pension, an ISA, fixed rate savings bond, or investments. It’s always worth talking to a professional independent financial adviser, when it comes to financial decisions, so check out our guidance and financial advice resources.

It’s also worth looking at your Investment Builder (DC savings) and whether it’s worth saving more here. As a flexible savings pot, where your money is invested for you, and the costs are subsidised by your employer, any additional contributions you make will benefit from tax relief (subject to HMRC limits), and you don’t need to retire to access this money, but you will need to wait at least until the minimum pension age.

Log in to My USS to review your Investment Builder savings and to check your money is invested where you want it to be and that your Target Retirement Age (TRA) is right for you. Your TRA is important if you’re in the Do It For Me option because we use this to determine when to start moving your investments to lower risk funds as you get closer to retirement.

To estimate what impact saving a bit more in the Investment Builder could have, you can use the Benefit Calculator in My USS.

Next steps

When it comes to making a financial plan here are a few good places to start:

Published: 14 October 2024