The Importance of Saving for and Monitoring Your Pension: Securing Your Future Beyond what you see today.

According to statistics from the National Pension Commission, PenCom the fastest growing demographic to the Nigerian pension scheme are those aged less than 30 who made up 38.9% of new RSA registrations in Q1 2023. Then came those in the 30 – 39 age group who were 35.2%. In total these 2 demographics accounted for 74% of new registrations in Q1 2023. These 2 demographics make up over 75% of all RSA holders as of 31 December 2022.

Why do I wish to bring this to the fore? I had a conversation on business partnership with a young person within this demographic who had connected with me to find out the chances of a partnership between our two organisations. During the discussions and bearing in mind what the moneycounsellors.com platform is all about, I asked if she had an RSA, whilst the response was in the affirmative, it transpired she does not monitor it, nor know how much savings she has in the account as she’s not going to need to for a long time so it’s not important. That was the trigger. And I know she’s not alone in that thinking and general attitude towards pensions, and at times savings. As such, I asked her to think again and even offered to have a townhall with her and her colleagues in her office to talk about savings, investments and pensions for free.

In today's fast-paced world, young individuals often prioritise immediate financial needs and short-term goals over long-term retirement planning. However, overlooking the importance of saving for and monitoring pension savings can have significant consequences later in life. It is crucial for individuals under 30, and even those older to actively save for their retirement and monitor their pension funds, even though they cannot (exceptions apply) access them until they reach the age of 50.

1.    First is the Power of Compound Interest

One of the key advantages of starting pension savings early is the power of compound interest. By investing in a pension fund at a young age, you can benefit from the compounding effect of your investments over time. Compound interest allows your savings to grow exponentially as the interest earned is reinvested, generating more interest. This compounding effect can significantly boost the overall value of your pension fund by the time you reach retirement age. By delaying saving for retirement, you miss out on the opportunity to maximize the benefits of compound interest.

2.    Increasing Life Expectancy

Generally, people are living longer now than ever before, thanks to advancements in healthcare and improved living conditions. While longer life expectancy is undoubtedly positive, it poses a challenge when it comes to funding a longer retirement period. By starting to save for retirement early, you and others can ensure you have sufficient funds to sustain yourselves throughout your retirement years. Ignoring pension savings in your younger years might lead to financial difficulties and a compromised lifestyle in later life.

3.    Increasing Cost of Living

It's no secret that the cost of living tends to rise over time. Inflation erodes the purchasing power of your money, making it essential to save and invest in assets that can outpace inflation. By diligently contributing to your pension fund, you protect your savings against the erosive effects of inflation and ensure that your money retains its value over the long term. Monitoring your pension savings also allows you to make necessary adjustments to ensure you stay on track to meet your retirement goals despite changes in the cost of living.

4.    Financial Independence and Peace of Mind

Saving for retirement and actively monitoring your pension funds empower you to achieve financial independence in your later years. It allows you to maintain your desired lifestyle and pursue your dreams and aspirations during retirement without financial constraints. By having a well-funded pension, you can enjoy peace of mind, knowing that you have diligently prepared for your future and can focus on living life to the fullest.

What is your pension worth today and what return on investment and other services are you getting?

You might think you have no control over your pension, but you do. True, that you cannot ask for the money today nor tell your PFA where to and where not to invest your savings, but you can sure make them be on their toes. Start with asking for your RSA statement. Find out what the annual returns on your fund has been year-to-date, over the last 2, 3, 5 or more years and since inception of the fund. Compare these with other funds from other PFA’s (you can do this on moneycounsellors.com). Ask for the annual accounts of your fund, you are entitled to it. If your PFA is not serving your needs, switch/transfer to another. It’s your right. The best part, they won’t know you’re switching till you’re gone. Download our free insightful guide on 👉🏾 ‘Evaluating your PFA’ 👈🏾 here.

Conclusion

While retirement may seem like a distant reality for individuals under 30, it is vital to start saving for, and monitoring your pension savings as early as possible. The power of compound interest, increasing life expectancy, rising cost of living, and the desire for financial independence all underscore the importance of active retirement planning. By taking control of your financial future and investing in your pension, you lay the foundation for a secure and fulfilling retirement. Remember, the earlier you start, the more time you have to build a substantial retirement nest egg.

Download our free insightful guide on:

👉🏾 Your Personal Financial Planning Journey Through the Years 👈🏾 here.

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