Automatic saving grace
ARE you saving enough for your future? A lot of us aren't – but an exciting new opportunity starting in October will help you do just that. Automatic enrolment will help you start putting money away for your retirement. And your employer and the government will contribute to the pot too.
If you're not already in a workplace pension, your company will choose one for you without you having to do any of the leg work.
Eventually, you'll need to put at least 4 per cent of your salary into the pension – and your boss will add a further 3 per cent and the government another 1 per cent (in the form of tax relief). These percentages do not apply to all your earnings, but just to what you earn between £5,564 and £42,475 a year.
However, when the scheme starts off it will only deduct 1 per cent from your pay and you'll get 1 per cent from your employer, as well as tax relief.
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You can opt out of a workplace pension, but if you do, you could be putting your financially secure retirement at risk. And you'll miss out on the added bonus of extra money going into the pot.
Four per cent of your salary may seem like quite a lot. But it doesn't start at that level – for existing employees it begins at 1 per cent – so you'll have plenty of time to prepare.
The key to managing this change in our income is for all of us to look carefully at our spending. A good starting point is to draw up a budget. This is a great way of focusing on what's coming in – and, more importantly, what's going out.
Take a look at the list and think about everything you spend money on. Is it really necessary? If it's a service, how much do you use it? Could you get it cheaper somewhere else?
There are plenty of ways to save money which won't lower your quality of life one little bit. For instance, let's look at your spending around the home.
Your mortgage is likely to be by far your biggest monthly outgoing. If you're on a variable rate, then it's likely you can switch provider at any time.
Even if you're on a fixed rate mortgage, you might be coming up to the end of the fixed period. In either case, it's well worth shopping around to see if you can get a better deal.
The aftermath of the credit crunch means it's harder now to get a mortgage than it used to be, but if you've a good credit rating, the low interest rates we're enjoying at present mean there are some excellent deals which could save you hundreds of pounds a year.
Shop around for your gas and electricity. If you do decide to change, the process is pretty painless. It will take about four to six weeks in total. Switching to a new supplier and a cheaper deal could yield savings of more than £350 a year. All you need to do is to go online and look at price comparison websites such as uswitch.com, moneysupermarket.com and energyhelpline.com.
Another option is to call your existing energy company and see if there's a better and cheaper tariff available.
Online tariffs which allow you to pay monthly by direct debit are usually the cheapest options. They also avoid the shock of receiving a big bill every three months or so.
As well as saving money on gas and electricity bills, it's not hard to cut down on your energy use. A good way is to turn down the thermostat on the central heating. According to the Energy Saving Trust, reducing it by just one degree in an average three-bedroomed semi will save you about £55 a year – and, by reducing your CO2 emissions by about 230 kilograms, you'll be helping the planet too.
Fitting a thermostat in a room which doesn't currently have one can result in even bigger savings of £70 a year. It may also be worth replacing devices which are more than about 12 years old, since newer ones are likely to be more efficient.
Another tip is to turn the thermostat right down in rooms you rarely use – guest bedrooms, for example.
Are you using energy saving bulbs in your home? They last a lot longer than conventional ones, and consume a fraction of the power. And remember to turn off the lights in rooms which are not being used.
Re-check the cost of your buildings and contents insurance. Again, shopping round can save you a tidy sum. Of course, don't under-insure your home – that would defeat the point – but do question whether you really need all the cover you're paying for. You may find you're covering, say, cycle or emergency plumbing repairs, that you simply don't need.
Think twice about taking up extended warranties on some household goods. They can be very poor value versus the price you paid for the items in the first place.
Finally, if you have too much clutter – and who hasn't? – then why not get rid of some of it via an online auction website like eBay? You'll feel better afterwards and have a handy bit of extra cash too.
A good place for getting value for money in most areas of personal spending is the Which? website at which.co.uk. There are plenty of other ways to save money. In the next article, we'll be looking at ways in which your shopping, motoring, travel, leisure and phones can all cost you less.
In the meantime, what are you waiting for? Get saving! And perhaps these vouchers (below) might be a good way to start.