You work hard. After you down tools, you want to be worried about planning your next dream holiday, not how to make ends meet. Take a look at this list and get your retirement planning underway so you can start to create the kind of future you want.
The changing ‘pension landscape’ puts the responsibility on you
In the past, one company pension was all a person needed to retire comfortably.
Today, it’s down to you to create the kind of pension plan that will meet (and grow with) your needs. Hitting that target will be far easier once you work out how much you’re aiming for.
Start by thinking about how much you’ll need
Keep in mind that your state pension is unlikely to be enough to live on. To find out how much your Basic State Pension will contribute to your overall retirement plan, go to www.gov.uk/new-state-pension/what-youll-get.
If you want a comfortable retirement, you’ll need to set yourself a target. What’s the minimum you’ll need? You won’t have to travel to work (and you’ll get a free bus pass) but you’ll still have regular outgoings, like your household utilities. Don’t forget inflation - the rising costs of goods and services over time could eat away at the spending power of your savings. Your retirement plan needs to take this into account.
The Pensions and Lifetime Savings Association (PLSA) published UK Retirement Living Standards in 2019, with the aim of giving people an idea of how much income they will need after tax to sustain different standards of lifestyles.
Visit the PLSA website to find out more, go to www.plsa.co.uk, or direct to the retirement living standards page www.retirementlivingstandards.org.uk.
Next, work out how much you have
You’ve looked at your State Pension, but what other pension plans do you have already? Think beyond your current employer - check the benefits packages of any former jobs you’ve held.
Add in your long term savings and investments and you’ll begin to get an idea of what your monthly retirement income will be.
Some of the pension types you may have already
State Pensions are provided by the UK Government, how much you’ll receive depends on your age and how much you’ve contributed.
Personal Pensions are schemes you can set up with a provider of your choice and arrange to pay a set amount into each month.
Workplace Pensions are arranged by your employer. DB pensions build up based on your salary and your years of membership (like the DB Section of the Halliburton Group UK Pension Plan).
Following auto-enrolment programs members often have numerous pension pots, so the government is working on a dashboard to allow people to track and manage these all in one place. It is anticipated this dashboard should be in place at some point towards the end of 2023. You can find out more about the program here: www.pensionsdashboardsprogramme.org.uk.
Think about when you want to retire
The idea of retiring early is attractive. However, fewer years of service has knock-on effects that are likely to reduce the amount of pension you’ll receive.
- Your Plan will have less time to grow
- You’re likely to spend more time in retirement (so you’ll receive a lower annual pension)
Is working longer practical for you?
Some retirees choose to work past the State Pension Age for extra income. Before you make this part of your plan, you’ll need to make sure it’s suitable for your line of work.
Ask your employer if they have set a Compulsory Retirement Age, or whether there are any laws preventing you from continuing.
Some people find it difficult to go directly from working all their lives, into immediate retirement. It’s not just the extra free time to consider, there are other changes that come with retirement. There are plenty of places for you to get ideas, but if you need a starting point or inspiration, here are a few websites that you might find useful:
www.ageuk.org.uk/information-advice/health-wellbeing
www.bhf.org.uk/informationsupport/heart-matters-magazine/wellbeing/retirement/retirement-tips
www.volunteeringmatters.org.uk/press/volunteering-a-key-part-of-a-happy-retirement
Weigh up your situation and take action
Is there a gap between your ideal and current situation? Do you plan to take on some part-time work to boost your retirement fund?
Furthermore, are there any gaps in your employment record that may affect how much pension you’re due? Ensure that you’ve nominated your spouse or family members to receive your pension should you die.
Just by considering some of the questions in this article it’s easy to see how much you need to consider. On the upside, taking some time to consider these issues will create the perfect starting point for you to plan your retirement.
And remember, it’s never too early to start!