‘Job hopping’ can boost your pension - finance expert
A financial expert says that the 21st century trend of ‘job hopping’ could be the key to boosting your retirement income.
Mike Jordan, whose firm Jordan Financial Management has been helping West Midlands people manage their finances for more than 25 years, says the disappearance of a having a ‘job for life’ may actually be good news for savers.
He was speaking after figures from FTAdviser suggested people who frequently take on new career opportunities have more saved for retirement.
Mike (pictured) said: “The old idea of having a ‘job for life’, or a long career at one company, seems very 20th Century now. And, just as employment habits change, the impact on pensions has changed too.
“This FTAdviser report indicates that people who have switched jobs four or more times in the last 10 years could boost their pension by around £15,000.
“This is excellent news in the modern economy where the average Brit changes job every five years.”
The main motivation for job hopping – higher salaries – is also the key to increasing your pension.
On average, workers who switch jobs receive a 5.2 per cent pay increase, providing both greater financial freedom in the short-term and better long-term security.
Mike explained: “The minimum auto-enrolment pension contribution for employees is 5 per cent of pensionable earnings, meaning a pay rise means more money is going into your pension each month even if you don’t make additional contributions.
“Long-term investment returns can also help. Usually, the money held in your pension is invested with the aim of delivering long-term growth. Until you reach retirement age, any returns are also invested.
“This compounding effect means even a small increase to your pension could lead to a more comfortable retirement lifestyle.
As a result, the FTAdviser research found the average job hopper has £105,538 in their pension. In comparison, the average adult has £89,762.
Salary increases aren’t the only factor behind job hoppers’ boosted pensions. New employers might offer additional perks which support your retirement goals.
However, for many people, switching jobs is not the right option. For those happy in their current position, Mike has some tips on how to increase your pension without changing job.
Mike said: “You can regularly review your role and salary, which can help you negotiate a pay rise. This can be daunting for some people, so I encourage you to do some preparation to help you feel more at ease. Consider how your work has contributed to the success of the business, how your role has changed, or skills you’d like to develop.”
You can also increase your pension when you receive a pay rise or a bonus. Many workers only make the minimum contribution to their pension, but you can increase this whenever you like.
Other solutions include boosting your pension when other financial commitments such as car loans or mortgages end, and maximising your employer pension contributions.
Currently employers must contribute a minimum of 3% of pensionable earnings to the pensions of eligible employees – though many will increase their contributions if you do the same.
Lastly, you can review how your pension is invested and regularly check on the performance of your investments.
Mike added: “There are many options available for increasing your pension whether you switch jobs regularly or not, and it’s something many people of working age neglect to consider.
“If you wish to discuss your pension and retirement plans with an expert, we’re always eager to help at Jordan Financial Management – just get in touch.”
