Tax treatment depends on your circumstances and is subject to change
Retirement is a funny old thing. For the majority of our lives and careers it is something that we tend to subconsciously shy away from. Retirement is either something we do not want to think too much about, or it is a phase in our lives we have little interest in.
Strangely, even though it now has capacity to be a major positive phase in our lives with great opportunities, it still tends to remind many of us of endings, slowing down, and general uncertainty. And rightly so – we cannot pretend we will not be dealing with some of these factors in later life.
With recent medical advances, global communications, and essential guidance at our fingertips, it is also a time for living dreams. And, as our careers mature and we get closer to that precious day when we say goodbye to the boss, the excitement begins to build for turning our post-work days into something fantastic.
Hopefully, during our working life we will have put in place those necessary financial cornerstones that allow us to live safely and comfortably. We will have also started to think about all those dreams from a growing bucket list. This is the ideal. However, the longer we leave attending to our retirement needs the more likely we will be facing restricted opportunities in our later lives.
Generally, it is around our early fifties that we really begin to take retirement more seriously. At this time, it becomes more of a reality as it is visible on the horizon. By this point, is it too late?
If you have had the opportunity, you will have started preparing for your retirement from an early age. As soon as you start earning in the UK, you begin paying National Insurance stamps which build towards your State Pension. This is great, but in the 21st century, the State Pension only provides fundamental financial cover. Therefore, it is wise to look at investing in a personal pension too. And now, if you are earning over £10,000 a year, a resident in the UK and aged 22 or over, your employer must offer you an occupational pension by law.
The advantage of an occupational pension over a private pension (which is not linked to your place of work) is the fact that your employer must also contribute at least 3% to your pension – so you are gaining extra contributions. Also, there is no hassle of tracking down a pension fund. Your employer will partner with a pension provider and money will be contributed from your wages.
The financial environment changes over time, along with financial regulations and opportunities, and your attitude to retirement. You may well revisit the efficiency of your occupational pension, consider other personal pension providers or other savings methods. The key point is to monitor your pension fund throughout your life. It is so easy to just forget about it, especially when we are not actively contributing and perhaps do not want to think about it. It is common to live in the false premise that now you have a fund you will be fine. You can regularly check your funds by looking at your annual pension reports or asking human resources about your current occupational pension.
Try to align contributions and pension benefits to your expected needs and dreams.
You may also commit to other long-term savings plans which will come to fruition when you have finished work. This could include bonds, high interest savings accounts (such as ISA’s which offer low tax benefits) or property.
As we age, the financial environment linked to savings and pensions begins to change. At 55, just as the idea of retirement is looming, most schemes allow you to withdraw your private pension pot. In effect this offers extra savings in the approach to retirement. This can be a great asset for paying off debts (giving a smoother start to retirement) or buying a family treat in the approach to leaving work. Remember, however, these savings were originally meant for your retirement years. Taking money from your pension fund early will leave you worse off in retirement. To keep you safe, always seek out the assistance of a regulated financial adviser such as Pension Access.
Review your pension regularly and keep a close eye on how changes in the financial environment (i.e., inflation) could de-rail your plans. Again, an experienced eye is precious so please feel free to contact us to check out how you could possibly maximise your options and payback in the current climate.
How much money will you need? This is never an easy question to answer. Your dreams for the future will change over time, so will the value and options linked to your savings, and the financial environment itself. The point is, unless you keep your retirement front of mind throughout your career, you will not have a blueprint to work from and you risk leaving it too late to cover your financial needs at the most important time.
As you approach retirement in your fifties it is easier to calculate essential financial needs. You will have a more fixed idea as to how you want your retirement to look – and what it is likely to cost. To get an idea of what income you will have coming in take a closer look at your State Pension, private pensions, savings and investments. Is it time to consider making greater contributions? Would your investments be more efficient with a different provider or fund? What pension fund offers the best options for your needs? You may also want to consider the risk attached to the investments in your pension fund. As a young person, you were more likely to go with high-risk investments but in later years it is recommended that safer investments are more appropriate.
Throughout your career, you are likely to work for different employers and so have a few occupational pensions. You may move funds between different pension providers. Don’t forget these savings when totalling the income you will be receiving in retirement. You can track earlier pensions by clicking here.
Congratulations, you made it and you have taken advantage of all the financial support out there to maximise income for your retirement dreams. Remember, don’t put off saving for your retirement until it is too late. Start early, monitor your long-term savings throughout your life and where possible seek out the guidance of a regulated financial adviser. On the approach to retirement in your later years, tidy up your investments and ensure that your precious money is in the most effective pots. If you need any support concerning your pension pot, please do not hesitate to contact us. That is what we are here for.
We can help you to make the best possible decisions when it comes to your pension.
Taking pension money early is not right for everyone as it will leave you worse off in retirement. Also, tax treatment depends on your circumstances and is subject to change. That’s why it makes sense to get help from a regulated specialist.
