Changing times: what does the future of work mean for saving?
MoneyPlus Features Team | January 10, 2019
For many of us who grew up last century or in the noughties, it feels like the future is happening now. OK, so we haven’t got those jetpacks yet but driverless cars are here – and the way we live and work is changing, fast.
A career often used to mean a job for life before you retired in your 60s – usually relying on the State Pension, or sometimes a company one.
It’s no longer the case – and it’s changing everything, including our savings.
As journalist and future of work commentator Georgina Fuller says: “Employers now recognise that most people want flexibility and more autonomy. The world of work has evolved considerably,” – and in a surprising number of ways.
Work is helping millions to save more
Workplace pension saving is becoming ‘everyday’ thanks to auto-enrolment which has seen around 9.5 million people join their workplace scheme.
It’s easier as you normally automatically join your workplace scheme, as long as you meet the criteria. Workplace pensions can be a great way to help build your life savings thanks to employer contributions – they pay in as long as you do (it’s effectively ‘free’ money for later in life) – and you normally get another boost from tax relief.
It comes straight from your salary – and for every £80 you pay in to your pension as a basic-rate taxpayer, tax relief takes it to £100, plus your employer’s contributions.
Keep in mind that your pension is an investment and it can go down as well as up in value, and could be worth less than was invested. Tax rules and legislation can change too and depend on your own circumstances.
Read more in our explainer, What’s so good about a pension?
There’s more of a work-life balance
Work is a big part of life, but we’re all busy with things like family commitments, fitness or voluntary work. Some people want more flexible working.
“The advent of the digital age also means that people have more opportunities than ever before to work however, wherever and whenever they want,” adds Georgina.
That could mean a more ‘fun’ or interesting working environment (think rooftop meetings or creative work spaces).
Many of us work part-time
Almost a quarter of people in the UK work part-time (Source: OECD), for a variety of reasons, including childcare needs, quality of life, or simply because they want to work less.
It sounds ideal but if you choose to reduce your hours it’s likely to affect the amount being paid into any workplace pension scheme.
Some choose to go part-time later in adult life, supplementing what they earn by taking some of their pension savings, currently from age 55.
We change jobs – and careers – more
We change jobs more frequently (a UK worker will change employer every five years on average, according to recent research) – and many of us will retrain and choose a completely different occupation at some point.
…we embrace the variety of a ‘portfolio career’
Freelance and ‘gig’ work is much more popular, in fact the number of self-employed in the UK increased from 3.3 million people (12.0% of the workforce) in 2001 to 4.8 million (15.1% of the workforce) in 2017.
‘Portfolio career’ is having several part-time, freelance or casual jobs. It’s a way of building variety into your life without relying too much on a single skill or income stream.
What does all this mean for your savings?
For many people, variety is becoming the spice of work life. But it does mean there’s a bit more to think about when it comes to making the most of your finances.
Six things to help you boost your financial wellbeing and your savings
Build-up your everyday savings
Having some emergency funds saved is usually a wise move for everyone, and more so if your income fluctuates.
That way you’re more likely to be able to weather the unexpected on the money front. Putting some money aside in a savings account means it’s ring-fenced and you’re less tempted to spend it.
Make the most of that workplace pension potential
Keep paying in and you keep benefitting from your employer’s contributions and, normally, that all-important tax relief. It’s easier to keep your savings habit going, though nothing’s guaranteed with a pension.
Consider a personal pension
Going self-employed at some point in your life means you won’t have the benefits of a workplace pension, but there are very good reasons to think about your own long-term savings, such as a personal pension and ISAs. You own your work – and your life savings.
Find any mislaid pensions
Changing jobs a few times means you’re more likely to have a number of workplace pensions. This can mean a few lost pensions along the way.
But all is not lost, quite literally.
Simplify things: Consider bringing your pensions together
Having all your pension savings in one place means one set of paperwork and one provider, so you might want to consider bringing them together. Do make sure you’re not giving up any valuable guarantees in your older pension plans. Check what you’ve got.
Just one pension makes it easier to check, and save into. You could also top it up when you want (maybe with the pay from a lucrative ‘gig’) and it could work out that you save money by just paying one set of fees.
Bringing pensions together is not always the right thing to do and won’t guarantee a better retirement as a result. You may want to take financial advice if you’re unsure and there’s normally a cost for this.
Manage your money online
When it comes to money, we’re all going digital – we shop online, manage our bank finances online, and even use apps to save and keep track of our pension savings.
But whatever you plan for your work future, doing what you can to help build your life savings while you’re working, could mean there’s a lot to look forward to later on.
The information here shouldn’t be taken as financial advice and is correct as of October 2018.