Research by Life Assurer Aegon reveals that 38% of individuals are not confident about their ability to retire comfortably, with many in the dark when it comes to their pension savings and arrangements for funding their retirement.
Getting into the savings habit early allows people to retire when they are ready, instead of having to extend their working life out of necessity rather than as a choice.
The research found that a quarter of people don’t know how much they hold in pensions, over a third have never estimated their income needs for retirement and amongst people aged 55- 64, i.e. those fast approaching retirements, most could expect a reduction in lifestyle.
At the same time, with the phasing out of final salary pensions the onus is very much with the individual to properly plan for their retirement. The introduction of auto-enrolment is no panacea; even with the increase in contributions from April, many individuals will find that what they are putting into the schemes is not enough and they will need to have additional savings.
We cannot emphasise enough how important it is to plan ahead in order to ensure sufficient provision for the lifestyle you desire in retirement.
Key questions to ask:
- What you want your retirement to look like?
- How much of a pension pot you will need to achieve that?
- How much of your income you need to save for retirement?
Whenever we hear about people underfunding their retirement, especially when they have decent salaries or other income streams, I know this is where an Independent Financial Adviser can help.
Retirement planning is not only about making sure you regularly put away enough of your wealth to accumulate a pension pot of sufficient size to have a decent retirement lifestyle. There are issues such as annual pension savings allowances, the lifetime allowances, areas such as inheritance tax and expression of wishes forms that require careful planning and attention also.
The situation intensifies when people approach the last 10- 15 years before retirement. This is when balancing pension saving and other tax efficient savings needs to be undertaken, looking ahead to when an individual will want to start drawing an income from their savings and investment in retirement and how best to do that tax efficiently. Also, now that some pension wealth can be passed on to named beneficiaries free of tax, pension funds offer more than just retirement planning opportunities.
Planning a phased retirement:
There are a record number of people aged over 50 in the workforce, making up almost a third of all workers. With life expectancies having risen in recent decades, for many people the notion of stopping work abruptly at retirement age is fading, with half of over- 50s preferring or needing to take a phased approach to retirement.
A point to bear in mind is that with the rapid rise of robotics and artificial intelligence, the part-time jobs people may be considering may not exist in a few years’ time. It is important to focus on saving now.
Certainly, for anyone looking to take a phased retirement, we’d advise talking to a Lowes Financial Management Consultant. This particularly relates where they intend to take a lump sum payment from their pension or pension income and continue working in a part-time capacity, as there could be issues around tax planning
Lowes Financial Management has been successfully managing people’s retirement planning for decades, helping to preserve family wealth for generations. We will analyse your pensions, savings and investments to provide a range of scenarios that will allow you to make informed decisions based on a real understanding of your options.
Whether you are unsure as to how you could use the pension freedoms to your best advantage, or are looking to build a retirement fund, Lowes can help you make the right decisions and help ensure your retirement meets your expectations, to ensure it remains in line with your financial goals.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.