What do you expect from retirement? A time of watching the pennies, making ends meet and worrying about the cost of heating? Or golden years, with travel and comfort, the chance do all the things you didn’t have time for when you were working?
The retirement you enjoy (or endure) will largely depend on the size of your pension. And the size of your pension will largely depend on how much you save into it.
Are you saving enough into your pension?
How much is enough?
Assuming that you have paid off the mortgage and dealt with the costs of children, you can probably enjoy retirement with a smaller income than you had when you were working. Working can mean commuting and other costs which may no longer be draining your funds.
Aiming for a retirement with 75% of your final working income seems to work for many people.
But are you building up a large enough pension pot to provide it?
Think about the kind of lifestyle you want in retirement. If you think you will be happy with a quiet life, you may not need to aim your pension pot so high with the contributions. But if you want travel, new cars and evenings out, it might mean paying in more now.
It’s hard to divert a large part of your income into saving for the future. There are plenty of demands on it now. It can be difficult even to know how much you are saving with a company pension, and for many people harder still to predict how large a final pension pot will be.
The Pensions and Lifetime Savings Association estimates that retirees need an income of £14,400 a year for a minimum standard of living in retirement, £31,300 for a moderate one and £43,100 for a comfortable one. Couples may need about 1/3 more.
The question really is, “are you saving enough”. You could use the ‘half your age’ approach to see the effect of years of potential investment growth for your contributions.
So, a 20-year-old may need to save 10% of their income. Someone who waits until they were 40 may need to save 20%. It might give you two thirds of your final salary as a pension by the time you reach 66.
Or it might not. And ‘might’ has no place in preparing for your future.
You need a clear figure. Work out how big a pension pot you need for the lifestyle you want. Then with that target in mind, and based on your age and your current pot size and making some assumptions about growth and charges, you can work out how much you still need to contribute
If all this sounds complicated, you might want to get professional help from a Continuum advisor, who can prepare a pension forecast.
Turning not enough into plenty
Many people discover their pension pot falls short of what they need and want. This is an unpleasant discovery, but there is no need to despair.
As long as you have a few years left before retirement rolls round, you have time to help give your pension pot a boost.
There are several ways you could boost your pension pot. You could:
- Pay in more each month. Remember, the taxman adds 20p to every £ you put in, 40p if you are a higher rate taxpay.
- Delay your retirement for a few years – giving your invested funds more time to potentially grow.
- Switch your invested funds to more rewarding investments, if your pension plan allows it and you have the appetite to increase the risk associated with this..
- If you have an employer’s pension scheme, you may need to set up a private pension plan to boost your pension prospects.
Which approach is appropriate for you? That will depend on your personal circumstances, how long you have before retirement, and how much you can afford to contribute.
At Continuum we know that there are almost always ways to help boost your pension pot, and we can work with you to find the approach that is suitable for your retirement plans. It’s never too late – but the sooner you call us, the easier it can be to get the pension pot that is suitable for your needs.
Why not call us today?
https://www.telegraph.co.uk/money/retirement/revealed-cost-of-a-comfortable-retirement
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment or retirement strategy, you should seek independent financial advice before embarking on any course of action.
A pension is a long-term investment; the fund value can go down as well as up and this can impact the level of pension benefits available. Pension Income could also be affected by interest rates at the time benefits are taken. Pension savings are at risk of being eroded by inflation.
The Financial Conduct Authority does not regulate taxation advice.
