It may seem like light years away, but retirement will creep around faster than you expect. So, the sooner you engage with the topic, the sooner you’ll get your plan in place and get working towards the retirement you deserve. The earlier you start saving for retirement, the longer your money has to grow. Reinvested dividends and, even in today’s climate of low interest rates, compound interest, can play an important part in investment growth.
Keep apathy at bay
The pension landscape has undergone vast changes over the last few years. Financial provision for our retirement has seen an emphasis, from being largely the responsibility of the state to largely the responsibility of the individual. Although it can seem a long way off, the reality of the situation is that careful planning now could make a considerable difference to the amount available in your pension fund at retirement, plus (within limits) you receive tax relief on contributions too.
Never too early to think about your pension
Ideally you should start planning your pension from the day you start work. No one wants to worry about money in their later years, and the way to help prevent that happening is to save regularly into a pension throughout your working life. In simple terms, there are three main types of pensions: workplace, personal and the State Pension.
Whatever type of pension you hold, you get tax relief at the highest rate of income tax you pay, on all contributions you make, subject to annual and lifetime allowances. At age 55, you can withdraw 25% of a defined contribution pension tax-free, which means the scheme is ‘crystallised’. You can keep the rest of the fund invested in an income drawdown plan, buy an annuity, or cash in your entire pension, subject to tax; or a pick and mix approach of all three. If you save into a workplace pension, your employer should make contributions alongside yours, providing a welcome boost to your pension.
How’s your retirement planning coming along?
You need more than a safety net Although the full new State Pension has increased to £168.60 per week, not everyone will get this amount as it will depend on their contribution record. The state retirement age is set to increase too, so if you were born after 6 April 1978 you won’t be entitled to receive your state pension until you’re 68 years old. Something for everyone If you’re self-employed, an employee, work part-time, run your own business or have accumulated pension pots with past employers, we can offer you advice; retirement should be an enjoyable and fulfilling stage of life, not a time spent worrying about money.
Steps to take
- Make pension saving a priority
- Consider topping up your contributions whenever your financial circumstances allow
- Speak to us about arranging a regular review to ensure your retirement plans remain on track
- Know your State Pension age and get a forecast from gov.uk to show you how much you’ll receive.