Our 5 Top Tips For Retirement Planning UK
It can seem like wishing your life away to start thinking about retirement planning UK in early adulthood. However, we now know that fewer people are enjoying a comfortable life past 60 because they did not make the effort or did not have the ability to plan and invest for the future.
Similarly, many think that because the state pension age continues to increase, they don’t have to worry about saving yet. In reality, the earlier you do so - the better equipped you will be for financial stability once you stop working. At the end of the day, the end goal is to provide you with the most money possible to live off of and enjoy your retirement.
Remember, these are the funds that will replace your annual income. So as you approach the state pension age or indeed start thinking more carefully about your investments, it is good to start by reviewing your finances.
We understand that there is always something else worth saving for. And while your working life may have some steam left in it - it’s never too early to start planning. We can help you take control, set a projection and update you on the progress of your saving with specialised reports. All of these things can be done at any age and will provide amazing benefits. So start today!
Start Early!
Retirement planning UK isn’t something that’s done overnight. Having clear goals as you move through life will ensure you have the capacity to live comfortably, save for things you need in the lead-up and then have enough invested for when you stop working.
By starting this process in your 20s, the investments you make can benefit from the most growth potential and offer you the highest level of savings in the future. Depending on your situation, you’re likely to have this opportunity when you first start work.
As long as you are over the age of 22 and earning more than £10k a year - your employer will automatically enrol you on a workplace pension scheme of their choice. You will immediately start receiving contributions they make on your behalf and it will kickstart the saving journey from that first employment.
We always suggest that you do not opt-out of this. No matter how long you plan on working for the company, nor the level of contribution being made. Any amount of investment is going to benefit your retirement planning UK and get you on track. You can always consolidate your pensions later in life if you believe it will make the process easier and help you get more for your money.
If you are self-employed, you can set up a self-invested personal pension or Lifetime ISA which will offer you the opportunity to contribute to future finances without employer contributions
Continuity To Hit Targets
A bit later on in life, we know you will probably be prioritising other big purchases and significant impacts on your finances. Things like having children or applying for mortgages can make saving much more difficult. However, you have to think about the money that’s been contributed already. Do you really miss it?
Professionally reviewing your investments each year will help keep you on track and whittle down your savings goals for the future. It’s a great way to consolidate everything and make adjustments to your strategy or contributions where necessary. For example - if you’ve benefited from a pay rise recently and are not needing the extra income for necessities or other savings, you may want to consider increasing your pension payments.
Using your annual reviews to set new goals and keep a clear understanding of your journey will ensure you make the relevant actions to grow your investments and take advantage of any benefits that may come your way. When you start dipping in and out, you lose the continuity and fall of the path.
Moving through this stage of life gives you an opportunity to invest in more high-risk assets that could see a bigger return. As many of these need long-term commitments, it is important to start looking into them now. Later down the line, it is often wise to move to a lower-risk approach that will look after your finances and keep them ticking over until you retire.
Consolidate And Adjust
Once you’re more settled into the lifestyle you enjoy and have a better understanding of what it takes to sustain that - you can take another look at your retirement planning UK. Pension accumulation will usually peak when you’re settled in a career and enjoying a fairly stable and regular salary increase.
Take advantage of this luxury! By now, you’ll be used to your general monthly outgoings and extra expenses that require savings on the side. In light of this, you can rethink your strategy and adjust it where possible.
Similarly, as you move closer to the state pension age, you’ll have a clearer picture of how your finances are going to look when you get there. Along with our free consultations, the projection you will get from reviewing your circumstances now will give you the best idea of what steps you should be taking next.
Once you’ve adjusted your contributions and perhaps set aside a little extra you know you won’t be needing - now is the time to ensure you’re aware of where your investments lie. With the possibility of having changed employers quite a few times now, it’s a good idea to get all of the information for different pensions and providers together. This will only make it easier when the time comes to withdraw funds. Check out our resources for more information on transferring pensions.
Boost Those Savings
Once you get to your 50s, it’s time to take a look at times where you may have fallen behind in saving. It happens to everyone and sometimes it can’t be helped. For example, sudden situation changes could mean using a lump of savings for an external circumstance. Or the unforeseen loss of a job may set some people back a while. Don’t fret, now is the time to get back on track and boost your investment.
Alongside your salary deductions, you may want to consider adding lump sums to your pension pot. While thinking about retirement planning UK - it’s great to do this wherever possible. Not only does it give you a great boost where you may have fallen back, but if you ever find yourself with some extra funds from a windfall or by other means - it’s being put to good use. (You won’t miss it at the time if it goes away immediately!)
Just something to consider - if you want to take this step to boost your savings, check your annual allowance. You don’t want to run into unnecessary fees or road bumps, so you may need to carry some over into the next tax year or invest it in other ways for now.
However, if you’ve followed our last 3 tips and are well on track, it might be time to check your lifetime allowance. This is the limit on how much you can accumulate through pension benefits. It’s important to understand where you lie within this limit because exceeding it could see you incur a hefty amount of tax on the excess.
Until the tax year 2025/26, the limit has been frozen to £1,073,100
If you withdraw as a lump sum, the excess will be taxed by 55%
If you use your funds as income withdrawals, there will be an immediate fee of 25% on top of income tax
Defined benefit schemes may deduct this 25% immediately - reducing your pension amount
To avoid these fees, it is more important than ever at this stage of life to consolidate your pension information and use our review services to keep an eye on your allowance.
Retirement Planning UK - The Time Has Come
As you reach your 60s, a lower risk approach may allow you to plan with more confidence for the amount you’ll receive when you stop working. It’s also time to consider how you wish to receive your pension. Withdrawing the funds as a lump sum suits some people, whereas having a more regular influx as income will benefit others.
Advantages Of A Lump Sum
No matter how large your pension pot may be, you are entitled to receive it as a one-off payment. This allows you more freedom and flexibility to spend or re-invest the money as you see fit. If you’re looking to leave a percentage to your family in the future, this option allows you to easily distribute or name beneficiaries.
Another benefit is that 25% can be withdrawn tax-free. Leaving the rest invested gives it more chance to grow and you can manage the income tax you pay on smaller amounts more efficiently.
Advantages Of Regular Payments
This option is supposed to set you up for the rest of your life as though you were still working and receiving a monthly income. Due to cost of living adjustments, you could also see your payments increase with inflation.
As well as this, many people actually see the flexibility that comes with a lump sum as a reason to choose regular payments. Overspending is a risk that is mitigated by smaller instalments. It allows you to keep up with spending and still have a sensible but enjoyable lifestyle.
Get A Head Start With Informed Pensions
Whether you’ve just started your retirement planning UK journey, or are looking to withdraw your investments in the near future - it can be daunting and confusing to say the least. That’s why we offer professional, ongoing support with hitting savings targets and keeping an eye on your investments.
It can be easy to forget about when the contributions disappear without you having to do anything. But we are here to keep you in the loop and help you make the most of your finances so you can enjoy life after work.
Our team of experts will take into account your current situation and offer you advice and clear projection for the future. Our initial consultation is completely free and there’s no obligation to go any further. So if you want to hit the ground running, get in touch today.
READY TO START A CONVERSATION ABOUT BUILDING A SUCCESSFUL FINANCIAL FUTURE?
We’ll help you navigate through the complexities of today’s financial world. The choices available can often be bewildering, which is why we are here. Our goal is to work with you to build a successful financial future, where you can live a happy, secure and prosperous life. To find out more, please contact us.