Whether you’re approaching retirement age, or just beginning your retirement planning journey, it’s important you feel confident that your pension is going to finance your future plans and provide the lifestyle you want once you stop working.
This does not constitute advice and advice should be sought in all instances before acting on it.
You might not think twice about saving into a pension as you know you’ll be receiving one from the state when you retire. But even for the most frugal of us, a state pension usually isn’t enough to live on and you should always have additional plans for supplemental pensions and retirement savings.
Aren’t pensions guaranteed by the government?
Not everyone is eligible for the full pension amount and it requires at least 35 qualifying years on your National Insurance record. If you have less than 10 years under your belt, then you won’t get anything.
The government pays most UK adults over the pension age a State Pension, which is currently:
- Retired after April 2016 – max (full rate) State Pension of £179.60 a week
- Retired before April 2016 – max (full rate) basic State Pension of £137.60 a week (a top-up is available for some, called the Additional State Pension)
Won’t my employer enrol me in a workplace pension?
Most people are automatically enrolled into a workplace pension. The minimum contribution required of your employer is 3% of your salary and you must also pay a minimum of 5% as well.
If, over the course of your time contributing to a pension, you only give the minimum, it might be difficult to save enough for retirement. With life expectancies growing longer, your retirement savings will need to be able to last you for at least two decades, maybe more. As soon as you’re financially able, increase your contributions to ensure you receive the income and live the lifestyle you want during retirement.
There’s a clear gap between what many people need to live comfortably during retirement and the pension you receive.
If you’re employed, you can save into your workplace pension, but there are always private pension options to explore to bridge the gap too.
It’s important to remember that when choosing the ways you save, you’re not limited to just one option. In fact, your retirement plan should include a variety of savings and investment options.
Should I let my pension provider choose my fund?
You can, but in order to reduce volatility of your investments, most pension default funds start out with a high-risk strategy and move your capital into lower risk investments – such as bonds and cash – as you get closer to retirement. But that approach isn’t for everyone, so don’t hesitate to ask for a customised plan.
Can I pass on a pension?
Yes, if you have been taking an income through drawdown and haven’t used any pension savings to purchase an annuity, then you can pass on what’s left to a loved one.
So, while there are choices for your retirement savings plan, it will be necessary to ensure you’re saving into a pension as well.
Review your pension options
To discuss your options for pension plans and how they fit into your overall financial plan, schedule a meeting with your trusted adviser today.
Are you considering your pension options?
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