If your employer could guarantee the size of the pension pot you would receive in retirement would you save more?
I'd wager that most workers would save more because everyone loves a guarantee. This is the system, called 'cash balance pensions', that they use in the US and some pension experts believe we need to import it to the UK.
Pensions minister Steve Webb has already started to change the pension rules to encourage 'risk sharing' in workplace pensions to try and rebalance the risk taken by employers and employees. In the past 'defined benefit' (DB) pensions that paid out a set retirement income for life put all the risk on the employer and it is unsurprising they died out. The shift has been to 'defined contribution' (DC) pensions where the employee receives a pension pot on retirement that is determined by how much they pay in and how well their investments do.
This see-sawing from DB to DC has meant interest in pensions has waned, and workers can be forgiven for failing to be enticed by a system that means you have to lock your money away for decades with no idea of what you'll get at the end.
Now the government is keen to find a balance again and pensions expert Steve Bee believes a cash balance system is the fairest way to share the risk. Instead of companies shouldering the extremely costly burden of paying an income for life to retired employers, as with DB, and instead they would be obliged to provide a guaranteed pot of money as long as workers kept up contributions at a certain level.
Although companies would have to run the risk of the stockmarket when investing the money in order to provide a guaranteed lump sum, this is far less onerous on balance sheets than paying an income for goodness knows how many years.
For individuals who keep their side of the bargain they would receive a set amount without having to make investment decisions about their money – which many people don't want to do.
The government is forcing us all to save more through auto-enrolment, so it would be nice if the 'semi-compulsory' system promised us all something in return. By encouraging, or maybe even forcing, employers to shoulder some of that burden again the government will move more quickly towards its target of getting us all saving for our old age.
Cut the cost of groceries
Would you save more if your pension pot was guaranteed?
Shopping starts long before you leave the house. Check the fridge, freezer and cupboards, then draw up a list of all the meals you plan to make and eat during the week (making sure you include any leftover perishables in those meals). That'll tell you exactly what you need to buy. This isn't everyone's favourite activity, but you'll be astonished how much less you buy - and crucially how much less you end up throwing away. This process typically cuts 5% off your grocery bill.
Supermarkets are entirely designed to make you do this, with flashy displays at the door, and discounts heaped high on the end of each aisle (they're put here because they know it takes a while to turn your trolley so they have longer to catch your eye). There will be new products and special offers which will sorely tempt you, but everything extra you buy will mean you either eat more or have more to throw away more at the end of the week.
There are three levels of products: the branded ones (including the premium supermarket ranges), the own-brands, and the own-brand value range. The best way to shift down is to move down one rung of the ladder on everything you buy - so if you usually buy branded baked beans go for own-brand, and if you usually buy own-brand, go for the value own-brand.
Most people choose a supermarket out of either convenience or habit. However, switching to a cheaper supermarket could be the easiest way to save. No one supermarket is cheaper for everything across the board. However, as a very rough rule of thumb Asda is the cheapest of the big players - it regularly wins awards for this (and did so last year), and it also has a pledge, which promises that the items you pick that are part of its scheme will be 10% cheaper than elsewhere or you can claim the difference. If you are willing to go beyond the big players, the discounters are substantially cheaper, so it's worth trying Aldi or Lidl to see what you could save.
Of course, no supermarket is cheaper for absolutely everything. And in some instances the supermarket is not the cheapest place for your food - local markets for example can offer much cheaper fruit and vegetables.
You'll need to get to know your local independents, but the best way of being sure of getting a good deal at the supermarkets is to do your research before you go. Mysupermarket.co.uk lets you compare prices for Tesco, Morrisons, Asda, Sainsbury's, Waitrose, Aldi and Ocado.
You'll need to put your shopping list into the site, which is a bit time-consuming the first time you do it but gets quicker once you have saved your favourites. It will tell you the cheapest places for your shopping - leaving you to choose whether to make more than one trip or to go with the supermarket that is cheapest for the most of your items.
There's definitely a right and wrong way to do this. The right way is to search for vouchers, coupons and deals for things you already need to buy. Alternatively, you can keep an eye out for BOGOF deals on things you regularly use (as long as they aren't perishable), and stock up on them. This can be useful for things like toiletries - just don't be tempted to switch to a more expensive brand in order to do this unless you have checked that the deal constitutes a saving from your usual brand at its usual price.
Supermarket deals are not simple to compare, so you could easily find yourself trying to work out if 350ml of something at 58p is cheaper or more expensive than 250ml of something at 46p. For most people this isn't the kind of maths that's easy to do on the fly. The only solution is to take a calculator and work it out - unless you want to focus on building world-class mental arithmetic skills.
Your careful list-making will not always go to plan, so if you end up eating something different one night, think about what you will do with the food you had planned to eat. Can you cook it and freeze it? Can you substitute it for another meal? Likewise with the leftovers, have you factored these into your eating plan? Or will you need to freeze it for next week?
This is classic advice for a reason. Research has shown that if we eat before we go we buy 18% less food. So have a sandwich and shave almost 20% off your bill.
If you are good at managing your credit cards, then shopping using a cashback card can be a great way to earn back money on your shopping. It's worth emphasising that in order for this to be a money-spinner you'll need to pay it off in full and on time every month. However, this is something that disciplined shoppers should definitely consider.