Tax treatment depends on your circumstances and is subject to change
Many people, on reaching their forties, may be afraid they have not given enough attention to their retirement fund in earlier years. But often it is only in our later years that we start to take our retirement a little more seriously.
When we are younger, there is a tendency to blinker ourselves to those post-work years because they signal a time of deteriorating health and a feeling that the main event is over.
So first of all, if you are feeling you have come a little late to the party, you are not alone. Secondly, it is not too late to make sure your savings are working efficiently. There is a lot you can do to get your retirement savings on track.
The good news is, retirement is a totally different place to what it was for our parents. Now, thanks to advances in communications, technology and medical science, it could well be the time to play out those long-desired dreams, and live life to the full. It can be a time when, if you play your cards right, you can enjoy life without the responsibility, regulations and restrictions of a working life. But this all needs finance. Now is the time to make it as effective as possible.
Retirement is a totally different ballgame to what our parents may have experienced. Now, instead of being an empty space where you are just existing after a career, it can be a time when you can really fulfil lifetime dreams, find the perfect place to live and fill your life with only those things which make you feel good. So, just like preparing for an upcoming holiday, or family event, you need to make sure the money is there for your needs and wants.
It’s never too early to start a pension. So if you do not have one already, make sure you create one. Nowadays in the UK, a pension can be linked to your employment (to encourage future saving). A percentage of your income will be taken at source towards your private pension. Your employer and the government also add a percentage to help you build your savings.
Other than that, you can consider starting your own private pension. The benefit over a workplace pension is it allows you to choose where you place your money. It is recommended you get a regulated financial adviser on board to walk you through all your different options.
As much as starting early is the most effective tactic – it is never too late to start.
Retirement can seem a long time in the future and on the journey you are likely to experience changes in the economy and income. Your vision of what you want and need may also change. So, you need to keep a close eye on how your long-term savings are performing.
For instance, a workplace pension is taken at source, so it easily goes out of mind – it is very easy to forget all about how that pot is growing. A pension itself can seem very complex and the idea of messing with it can seem a definite no-no.
So, if you have a workplace pension, check up on it. You can do this through your Human Resources Department (or equivalent) or directly with the pension provider that your employer uses.
If you have a private pension, don’t ignore those yearly summaries, or, in times of uncertainty, contact your pension provider directly.
In either case, unless you are a financial wizard, your savings options or the performance of the fund are not going to be immediately clear. We recommend that you seek out a regulated financial adviser (such as Pension Access) to walk you through those options which are likely to enhance your future investment.
Do you have savings from previous work placements or private pensions you no longer pay into? Whatever money you have saved is accessible to you when you retire. Whatever you do, make sure you track those little funds down.
You can trace old pensions through the government pension finding service. Before using the service try to gather as much information as possible about a previous employer or the pension fund you previously paid into. This will also help you find your pension if the provider has changed their name, gone bust, or changed location. Another service like this – started in 2022 – is Gretl which assists individuals to track down all kinds of investments.
It doesn’t just have to be pensions. Your savings funds whatever they may be, could be key to your future happiness. Check out your shorter-term savings. Is there money here just sitting doing nothing? Whatever the current interest rates, strategise your savings so you are aware of weekly/daily needs. This will help you save in appropriate accounts. Leaving a little amount in an ISA for the long-term can be an efficient way to put money aside.
Your State Pension is going to be fundamental to your retirement income. But believe it or not, not everyone will receive the same amount. It all depends on the amount of National Insurance contributions you have made throughout your working career. So, if you have had a lot of time away from work or if you have been self-employed, your contributions may not be quite up to scratch.
Make sure you know when you can claim it and what that amount will be. You can check your State Pension amount here. If you need to, you can make additional voluntary contributions to bring you up to the optimum level.
Investments will go up and down, and the onset of inflation can dictate how much money you have to play with each week. The answer is to take your future needs into account when budgeting. This way you are not only dealing with present needs, but also future hopes. For instance, as your income, or the economic climate changes you may have more money available to put into your private pension fund. Take advantage of these times as of course the reverse holds true – when money is tight you may have to think about reducing how much money you are adding to your fund.
This may be useful if you have more than one pension. Combining a lot of smaller pensions into a larger one may well save on fund charges and make it a great deal easier to track all of your pension savings. Be sure to combine your funds into a pension that has a history of higher performance – this will give your savings a better chance to grow. But again, for safety, always seek out the support of a regulated financial adviser to assist in changing funds around because, in some cases, transferring your funds could mean giving up valuable benefits. It’s important to remember that past performance is no indicator of future results. Investments can go down as well as up.
Throughout this article we have repeatedly recommended a financial adviser. It can be useful at the very beginning if you are starting from scratch (the pension and savings world can be very complex) and it can be essential if you are considering moving pensions around. They can offer an idea as to what pension plans are on the market, if there is a deal out there that’s more appropriate to your needs and guide you with your future savings.
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.
