Pensions advice and tips
Having a plan in place for retirement can give you peace of mind when planning for the future. Whatever your age, it’s never too early to start planning and considering how much you’d like to save for when it comes to your retirement.
Pension planning is important to ensure you benefit from all the hard work you’ve put in over the years, spending your days appreciating life and the fun activities you enjoy the most.
Understanding how much money you’ll need for the retirement you desire will stand you in good stead. Depending on your personal and economic circumstances, lifestyle and plans, this may change over time so it is important to keep track.
To help understand how much you’ll receive and any extra you might need on retirement age, you can start by requesting a state pension statement, which will give you an estimate based on your National Insurance contributions to date.
Deciding what you want to do with your pension pot will depend on your lifestyle, age, partner or family, health, financial commitments and other sources of income.
Start saving now
Whatever your age and whenever you plan to retire, it’s never too late to start saving towards your pension. Don’t leave it too late, the more you save now, the more you’ll have come retirement age. Think about how much you can afford to save based on your current budget and how much you’ll need in retirement to fund the lifestyle you want. Part of understanding how much you should be saving is to know what sort of retirement you want.
Understanding the different types of pension
Before you start saving, it’s important to workout which pension schemes suit your retirement plans and your individual needs. Your pension provider will be able to provide guidance and pensions advice on the types of pension on offer and can provide guidance on which suits your personal circumstances.
- State pension – this is a pension that everyone gets upon retirement age, which is a regular payment from the government and based on your National Insurance contributions. Over the years, if you have had a gap in employment, you might not be eligible for a full State Pension, but you can top up your contributions to cover this. You can find out any gaps in your national insurance contributions by accessing the Government website here: https://www.gov.uk/check-national-insurance-record
- Workplace pensions – these are arranged by your employer. All employers are now legally required to automatically enrol workers into a work-based pension scheme. Your employer and the government also contribute to this.
- Personal pension scheme – a personal pension scheme is privately funded. Anyone can have a private pension scheme and there are many types available where your money is invested and mananged on your behalf or Stakeholder Pensions and SIPP (Self Invested Personal Pension) where you can have more control over the investments going into you pensions.
Boosting your pension
The most obvious way to boost your pension pot is to pay more into it. Putting any spare income into a pension is one of the most tax-efficient ways of investing it. Pay rises, paying off loans, or having received financial gifts are just some of the times when this might be possible.
If you have a personal, stakeholder or workplace ‘contribution’ pension, it’s likely that some or all of your money will be invested in funds, stocks and shares. Generally, you can afford to take more risk when you’re younger and less the older you get. The longer your money is invested, the more scope you’ll have to deal with investment performance, going up and down over time. A financial or pension adviser will be able to offer pensions advice on the best ways to invest into your pension pot dependant on what you hope to get out of it.
If you are a higher rate taxpayer making contributions to a workplace or personal pension scheme that operates on a ‘relief at source basis’, basic rate tax relief of 20% is claimed on the contribution from the government and added to the pension.
All personal pension schemes operate on a ‘relief at source basis’, but for some workplace schemes you can get the higher rate tax relief automatically. Be sure to check with your provider if you’re a higher rate taxpayer and are not sure if you’re getting the tax relief.
Bring pension pots together
If you have several pension pots, from workplace schemes or personal pensions you could combine all pensions together, so they are all in one place. This could help to keep track and manage your pensions more easily, as well as give you more choice for investments.
However, it’s important to seek financial advice before doing so, as some pension providers may charge for you to transfer your pension and if you transfer from your current workplace scheme, your employer will no longer contribute to your pot.
Annual reviews for pensions advice
No matter when you plan to retire, it’s important not to forget about your pension. Checking it regularly will help to keep track and review how your investments are performing. Annual reviews will help you to see the value of your pension and are also important to make sure you’re still comfortable with the level of risk in investments – and make changes if not. Speak to an expert for valuable pensions advice so your money is working for you in the best way possible
If you would like help planning your pension and future retirement the Langricks team are here to help.