Don’t want to work till your Basic State Pension age? A solid retirement plan will help

26th February 2021, 9:41 am

With the Basic State Pension age due to increase to age 68 between 2037 and 2039, many people will have to work for longer or fund their own retirement if they want or need to retire earlier. As a result, it has never been more important for people to build up their own private pension so they have the option to retire before their basic state pension age. Here are some tips to help with your retirement planning.

Top tips

  • Start your retirement planning early. Irrespective of your current age, or whether or not you have a pension, it is never too early to start planning for your retirement. In fact, the earlier you start planning for your retirement, the better prepared you will be later in life.
  • Think about when you would like to retire. Try to think about the age you would like to retire. Don’t just accept that you will have to work until your basic state pension age. If you want to retire earlier, you can make this happen with good retirement planning. Once you have decided your retirement age, this will also help focus your mind and give you the platform to start planning ahead.
  • Review your current income and expenditure. This will not only give you an idea of your current outgoings but you can adapt your workings out to determine what your anticipated outgoings might be in retirement. You will then have an idea of both the income and pension pot you might need in retirement. Once you have done this, you can focus on building up a pension pot to ensure you can retire at your chosen retirement age. This exercise will also help you calculate what (if any) surplus funds you have available that could be used to make regular or additional pension contributions.
  • Contribute to a pension sooner rather than later. If it is affordable then consider contributing to a pension early. By saving earlier and over a long period of time, this could increase the pension available to you in retirement. Even a relatively small amount over a long period of time can make a difference.  By making a personal pension contribution, you will also benefit from tax relief from the government. For example, if you are a basic rate tax payer, for every 80p you pay into a pension, the government will pay an additional 20p into your pension, making it a very tax efficient way to save for your retirement.
  • Join your workplace pension. If you are not a member of your current employer’s workplace pension but eligible to join then you should consider joining the scheme. By joining your workplace pension, your employer will make pension contributions on your behalf which would affectively be free money to you. You will also make personal pension contributions which will benefit from tax relief. The combined pension contributions make it a good way to build up a pension fund.
  • Make additional pension contributions. If you have surplus income or savings on deposit earning little or no interest then you could consider topping up your pension by making additional pension contributions. If you identify that you might have a pension shortfall then making additional pension contributions is a good way to try and make up any shortfall.
  • Don’t be afraid to seek financial advice. The rules around pensions and withdrawing pension benefits can be quite complex and are constantly changing. For this reason, you may find it beneficial to speak to a financial adviser who has expertise in this area. As well as gaining a better understanding of your existing pension portfolio and the pension rules, you might find that a financial adviser can add value to your pension portfolio by managing your pension portfolio and providing you with ongoing financial advice.
  • Take advantage of a free pension review. If you are fortunate enough to have several existing pension plans, it is important you don’t neglect them and you review them regularly. Many reputable financial advisers offer all potential new clients a free pension review. Therefore, if you have not had a recent pension review then why not take advantage of a free pension review. A pension review will allow you to get a better understanding of what you have, what you are invested in, the options available to you and whether or not you are on track to retire at your chosen retirement age.
  • What should I look for when searching for a financial adviser.  Covid has meant that financial advisers have been unable to see clients face to face, but you can still speak to an adviser using virtual technology. However, the most important factor you need to consider when choosing a financial adviser, is whether they are fully regulated by the Financial Conduct Authority (FCA). You can do this by searching the FCA register via the FCA website. If they do not appear on the FCA register, this would suggest they are not regulated and therefore it would not be advisable to use them.   You may also wish to consider using an independent financial adviser as they have access to the whole of market which will increase the options available to you.

If you have any questions about the tips above, or would like to have a free, no-obligation review of your pension plan, drop me a line at [email protected] and I will be happy to have a chat. Whatever your plan is, knowing your available options and plan ahead will make sure you don’t have to rely solely on Basic State Pension, which is increasingly important in the ever-changing world we live in.

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