The average Brit wastes £39 a month on direct debits they don’t want or use, and there could be a huge long-term benefit to cancelling them. New analysis from Standard Life, part of Phoenix Group, demonstrates how cutting out unnecessary monthly payments and redirecting them into a pension could give a pension pot a healthy boost.
The February Fade
People often start the year with good intentions and might try something new – whether that be signing up to the gym or taking out a subscription to fuel a new hobby. While almost half of all adults say they make yearly resolutions, only about 10%2 manage to stick to them. Anyone that doesn’t cancel these monthly payments once they’ve stopped using them will see their outgoings add up over time – and this money could be better used elsewhere.
The potential wasted direct debit pension cost
Standard Life analysis finds that someone who began working with a salary of £25,000 a year and paid the minimum monthly auto-enrolment contributions (5% employee, 3% employer) from the age of 22, could have a total retirement fund of £210,000 by the age of 68, allowing for 2% inflation over the period. However, someone that redirected their wasted direct debits into a pension pot could boost it by £39 a month, also rising by 2% inflation each year, and build up a retirement fund of £247,000 by the age of 68 – £37,000 more, in today’s prices.
Mike Ambery, Managing Director for Workplace Pensions at Standard Life said: “If you’re approaching your morning workout with less enthusiasm this week, or you’ve given up on your 75 HARD, you’re not alone. The New Year is a great time to set goals and build new habits, but when living a busy life, things can easily slip and in the process, it can be easy to lose track of your monthly financial incomings and outgoings. It’s very easy to remain signed up to a service or membership that you no longer use and this wastage can really build over time. To avoid unnecessary expenses, it’s important to keep an eye on your regular payments and cancel old direct debits or outgoings that you no longer use. These extra funds can help with short term expenses or could give your long-term savings a boost. It’s amazing to see the impact that the average monthly wasted direct debit payment could have if you funnelled it towards a pension instead.”
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