According to the Guardian, households in the UK have managed to save about £190 billion since the start of the pandemic.
While much of the savings came from national lockdowns preventing us from going on holiday or eating out, a significant portion has come from the savings generated by working from home.
According to the Office for National Statistics (ONS), 35.9% of the employed population worked from home at some point during 2020. And this trend may continue, with the ONS reporting that 24% of businesses plan to keep increased homeworking opportunities going forward.
With Brits saving billions thanks to the “work from home” model, and many companies retaining this method of work or moving to flexible options in the future, could this help you to retire early?
Read on to find out more.
Not needing to commute is a huge bonus for savers
According to Nutmeg, an online investment manager, workers in the UK are saving about £240 a month by not going into the office. This equates to nearly £2,900 a year.
The lack of a commute makes up the majority of these savings since regular public transport fares or refills at the petrol station can add up quite significantly. Frequent car usage can also lead to increased servicing costs and repairs.
Other savings brought about by staying at home include avoiding temptations such as an early morning coffee on the way to work, or a nice lunch at the local café on your break.
You may even save on your clothing purchases, because now you only need the top half of the suit you always wear for meetings!
The extra money you can put away thanks to working from home could give a much-needed boost to your savings. You could use it to bolster your emergency fund, or it could even help you to retire early.
Adding part of your homeworking savings could help you retire early
Nutmeg report that, since the pandemic, 14% of people have increased the amount they pay into their pension by an average of £128 a month. If you did this over the course of a year, it would total an extra £1,536 invested into your pension; that’s half of what you’re saving by working from home.
Nutmeg have worked out that, if you kept this extra £128 pension contribution up for 30 years, you could retire with an additional £170,000 in your pension*.
These added contributions could help you to retire several years early. Alternatively, if you continued paying into your pension for longer, you could give yourself a shorter but much more luxurious retirement, with more to spend each year.
Please note that the value of your investments may go down as well as up and that predictions and past performance are not necessarily indicative of the future.
Even if you’re returning to the office, there are still ways to save
Not everyone has the option to continue working remotely, but there are still ways that you can save money, boost your pension contributions, and retire early.
Takeaway coffees and lunches are a huge temptation, but an expensive one too. For example, the typical supermarket meal deal is usually £3, and a drink from a popular coffee house can often be about the same. If you had both three times a week, that could total £78 a month, or almost £1,000 a year!
Consider bringing your own lunch and taking advantage of company coffee machines and kettles. Plus, not going out on your break prevents you from tempting purchases elsewhere on the high street.
If your employer is operating with a “flexible working model”, where you work some days in the office and some at home, you may be able to benefit from “flexi” transport tickets. They are typically sold as season tickets and allow a limited amount of travel during a set timeframe.
The key point is this: even if you’re not working from home all the time, there are still savings to be made. If you used these savings to make additional pension contributions, you could retire earlier than you expect.
Contact us if you’re thinking of retiring early
If you’d like to retire early but you’re not sure where to start, consider speaking to a financial planner. We can help you figure out if an early retirement is possible, and when you’re likely to achieve it.
By considering your income, expenditure, and your personal situation, we can formulate a plan to help you begin your transition into retired life.
If you’re interested in finding out more about what we can do to help, feel free to get in touch; email firstname.lastname@example.org or call us on 01454 416 653.
This figure assumes investment growth of 5% per annum, and considers Nutmeg fees, fund costs, and market spread into their totals. They are inflation-adjusted for contributions (increase of 2% per year) and assume a 30-year retirement.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.