With all the change going on in the pension industry at the moment, it can feel overwhelming deciding what the best thing is to do to help you prepare most adequately for the future.
Throughout our lives we will all have financial priorities that seem to take precedence over saving for the future, and it can be tempting to use all the cash we can get our hands on to pay for things in the here and now.
However, with our research showing that on average Brits are facing a £7,800 a year shortfall in what they want from their retirement income, it’s essential that we don’t only start thinking about retirement when it is too late.
Here are some tips to help you navigate the pension freedoms and start planning for retirement from today, whatever stage of life you are at:
IN YOUR 20s:
Talk to your employer: The majority of the UK’s workers should now be enrolled in a workplace pension through the automatic enrolment legislation, so talk to your employer to check you are enrolled in your scheme.
It’s a tax-efficient way to save and for every pound you pay in, your employer pays in too.
If you are already enrolled, see if you can increase your contribution slightly – even raising it by just by a small amount over time can make a big difference to your final retirement income.
IN YOUR 30s AND 40s:
See where you can save money to add to your pension: Getting organised is one of the most important things you can do when it comes to managing your finances.
Set up a tracker that shows you everything that is coming in and out every month, including any debts you are paying off, and see where you might be able to cut down on your spending in order to put a little bit extra aside every month. It may seem difficult now, but your pensioner self will thank you further down the line.
The Money Advice Service has a good online tool that shows you how much money you have left after paying your bills each month that you might find useful: https://www.moneyadviceservice.org.uk/en/tools/budget-planner?gclid=CLjAt9XV6cYCFfQatAod9ewNSw
IN YOUR 50s AND 60s
Don’t rush in: The pensions industry is going through one of the biggest changes in a generation at the moment with the introduction of legislation including auto-enrolment and pension freedoms.
It’s complex stuff, so make sure you check out all the options for what you are going to do with your cash once you reach retirement age and make sure you have a clear idea of how much you are going to need for the retirement you want.
You’re a long time retired and some of the decisions that you make about your pension pot are irreversible, so don’t feel pressured, shop around and make use of the tools available to you.
This may be through online tools such as theScottish Widows Retirement Planner, free guidance from the Government’s PensionWise service, or you may even want to consider if you would benefit from paid-for financial advice.
Plan for your lifestyle: Don’t think about products when planning your retirement, think about your life, how you want to live it in retirement, and then fit your solutions into it.
Consider tax: Be careful how you draw your cash – spreading your payments over different tax years can dramatically reduce the tax payable. Taking your pension pot whilst you are still working means it will be added on to your salary.
Beware of the Scammers: It’s widely recognised that scammers are out to get their hands on all this money flowing into the system. If it sounds too good to be true it probably is – unsolicited phone-calls are not the way forward.
Make sure you report any potential scammers to the UK’s national fraud and internet crime reporting centre: http://www.actionfraud.police.uk/