It’s all about the planning, now and in the future.
The government has confirmed that it plans to increase the minimum pension age at which benefits under registered pension schemes can generally be accessed, without a tax penalty, from age 55 to age 57 commencing 6 April 2028.
The changing shape of retirement.
Are you ‘mid or late career’ or planning to retire within ten years? If the answer’s ‘yes’, then you probably want to know the answers to these questions: Will I be able to retire when I want to? Will I run out of money? How can I guarantee the kind of retirement I want?
Reinvent your future to make it work for you.
Whether you are already approaching retirement age, or that’s a long way in the future, time flies and it’s important to know your pension is going to provide the lifestyle you want once you stop working. Pension legislation is extremely complex and it’s not realistic to expect everyone to understand it completely. But, since we all hope to retire one day, it is important to get to grips with some of the basics.
Tax relief and lifetime limits.
Saving into a pension is one of the most tax-efficient ways to save for your retirement. Not only do pensions enable you to grow your retirement savings largely free of tax, but they also provide tax relief on the contributions you make.
Financial security in retirement can never be taken for granted.
Life changes when you retire – and so does how you spend your money. Whatever your plans, it’s important to keep on top of things and think about the lifestyle you want. It’s also worth noting the average life expectancy at age 65 years is 18.6 years for men and 21.0 years for women..
Boosting future retirement savings
Young people are faced with a unique set of challenges when it comes to saving for retirement. One of these is perception. They can often think of their ‘future self’ as a different person and so may prefer holding on to their income for more immediate priorities, like a first home deposit, rather than saving for someone they perceive as a stranger.
A year lost for saving and a year added for spending.
An increasing number of people have been forced into early retirement due to the economic impact of the coronavirus (COVID-19), with many worried about how they’ll make ends meet in the future. Because of the pandemic, we are currently in a challenging economic period – and the global economy has taken over ten years to recover from the shock of the last financial crisis..
How to ensure a comfortable retirement
The pension freedoms have given retirees a whole host of new options. There is no longer a compulsory requirement to purchase an annuity (a guaranteed income for life) when you retire. The introduction of pension freedoms brought about fundamental changes to the way we can access our pension savings.
Planning Ahead For Your Financial Future Together
Some couples may prefer to keep their finances separate, while others share everything.
Whichever method you’ve chosen, when it comes to retirement saving, it’s worth planning together to ensure you’ve made the most of all the allowances and benefits offered to couples. Your golden years may ultimately be the best of your relationship if you understand each other’s future goals, needs and expectations.
SET YOUR BUDGET
The first step of planning for retirement is to look at how much money you’ll need to cover your outgoings. Start by analysing your current spending, and then identify where your spending might increase and decrease over the years. If you have different perspectives on how extravagant your lifestyle will be, it’s best to discuss this openly and early on as you’ll need to come to an agreement. One of you might be underestimating how much you’ll need or overestimating what you can realistically afford. Remember to plan for different circumstances. Hopefully, you’ll enjoy a decades-long retirement together, but your finances might look very different if one of you were to fall ill or die. It might be unpleasant to discuss but is essential to plan for.
ASSESS YOUR FINANCES
Next, look at the income you’ll both have from the State Pension and any private pensions. Set aside some time to trace pensions from previous workplaces that you might have forgotten about or not known an employer was paying into, as many people find extra cash that way. Make sure you understand all of your options for withdrawing your pensions, as the amount you get back from your pension depends, in part, on which option you choose. Consider, for example, whether you want to take a tax-free lump sum of up to 25% of your pension savings at the start of your retirement, and how best you could use that. If you have any debts or savings you haven’t mentioned to your partner, it would be wise to open up about these now.
TOP UP YOUR SAVINGS
If your existing pension savings won’t provide the income you think you’ll need, look at ways to address the shortfall. Could you make some lifestyle changes now to save more for later? If one or both of you have less than 35 years on your National Insurance record, you can make voluntary contributions to receive more State Pension. It’s worth obtaining professional financial advice about using both of your pension allowances, and whose pension it is more sensible to contribute to. You both have an ‘annual allowance’, which is £40,000 in the 2021/22 tax year, or 100% of your income if you earn less than £40,000.
NEED HELP WITH YOUR RETIREMENT PLAN?
It’s important to carry out any financial planning exercise together, holistically, as a couple. If you don’t fully understand your options or want to boost your pension savings, speak to Fish Saltus to discuss your circumstances.
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX ADVICE