Your retirement is undoubtedly something to look forward to – it’s your chance to do all the things you haven’t been able to during your working life. Though, with it being such a significant event, there’s a chance you may be worried that you haven’t saved enough to support your dream lifestyle.
If you’re feeling like this, then you aren’t alone, as research reported by City A.M. revealed that 58% of adults over 40 were anxious about the prospect of retiring.
The good news is that there are several pragmatic steps you can take now to feel more confident about the future, ensuring you can spend your well-deserved retirement the way you want. Here are four ways to do so.
1. Start planning now, regardless of your age
Whether retirement is just around the corner or still years away, your first step to becoming more confident about retirement should be to start planning for it now.
The earlier you start planning, the more secure you may feel about the future. You may want to start thinking about what you want to do in retirement – this could include a round-the-world trip for which you’ll need a larger retirement fund, or simply relaxing with your loved ones.
A strong retirement plan starts with your goals. When you understand what you’d like to achieve when you stop working, this can help you work out how much you’d likely need to save to live this lifestyle and the steps you need to take now.
Moreover, the earlier you start saving, the more you could accumulate for retirement.
Nest gives a fitting example of this.
Imagine two people started making £200 monthly contributions to their pension fund for 10 years, totalling £24,000. Person one makes contributions between the ages of 22 and 32, while person two makes theirs between age 32 and 42.
Assuming both people receive investment returns of 5% each year until the age of 60, person one would have £125,000, while person two would only have around £77,000.
Even though they both saved the same amount of money, time and compounding returns mean that the person who started saving earlier has more in their pot overall.
2. Keep track of or locate any old pension pots
If you’ve worked for several different employers throughout your life, or have started your own pension at some point, there’s a chance you could have various retirement funds scattered across different companies or providers.
This could be more common than you think, as Zippia reveals that the average person holds 12 jobs in their lifetime.
As a result, it may be easy to overlook or lose one of your pension funds. Conveniently, 29 October is National Pension Tracing Day, so now may be the ideal time to track down any old pension pots to ensure you maximise your retirement income.
If you know who your pension is with, contact the provider to trace any “lost” funds. If not, contact your previous employers, who should be able to point you in the right direction.
However, if you’re still struggling to locate any old retirement funds, you could use the Pension Tracing Service offered by the government.
Unbiased shows that there is more than £19 billion in forgotten pension pots in the UK, each with an average size of £13,000. Finding an old pot with a sum of money such as this could give your retirement savings a considerable boost, which could, in turn, help you feel more confident that you have sufficient funds when you stop working.
3. Ensure you’re eligible for the full State Pension
The State Pension could provide the bedrock of your retirement income.
As of the 2023/24 tax year, the new full State Pension is £203.85 a week, or £10,600 yearly. To be eligible for this, you must have made enough National Insurance contributions (NICs), either through work or other credits, such as receiving benefits or caring for a child.
You need 10 years of NICs to qualify for any State Pension, or 35 years for the full State Pension. If you missed work due to an illness or took time off to raise your children and don’t have the 35 years necessary for the full State Pension, you will receive a proportion of the payment.
As such, obtaining a State Pension forecast from the government website may be worthwhile to determine how much you’re entitled to and whether there are any gaps in your record.
If you do find gaps, you can typically make up to six years’ worth of missed NICs. MoneyHelper reports that:
- Each extra qualifying year added to your State Pension is essentially worth £302.64 each year (based on the 2023/24 rates)
- Credits cost £179.40 for a year of Class 2 (self-employed), or £907.40 for Class 3 (employed)
- Buying credits could boost your retirement income by more than £6,000 if you live 20 years past the State Pension Age.
You may have even unknowingly accrued credits that you could use to fill in any gaps in your record if you lived or worked in the UK between 2006 and 2016 and:
- Received maternity, paternity, or adoption pay, but didn’t earn enough in a qualifying year
- Served on a jury while in employment
- Searched for work while registered as unemployed
- Supported an ill, injured, or disabled individual for 20 hours a week or more, or were the primary carer for your child under the age of 12
- Received Statutory Sick Pay and didn’t earn enough for a qualifying year.
Maximising your State Pension entitlement now could give you confidence and reassurance that you’ll receive a guaranteed income when you reach State Pension Age, providing you with an extra source of funds to support your lifestyle.
4. Speak to a professional
Above all, it can be beneficial to work with a professional if you’re concerned or anxious about your retirement. In fact, Standard Life reveals that those who work with an adviser believe they’ll be able to fund their dream retirement lifestyle by six more years than those who didn’t take advice.
With our help, we can assist you in devising a comprehensive plan to ensure that you understand your retirement goals, and that you’re on track to achieve your dream retirement.
We could even help you ensure that you don’t end up with a shortfall many years into your retirement, and aid you in drawing your retirement income in a tax-efficient and sustainable way.
To find out more, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433 to find out more.
Please note:
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.
Workplace Pensions are regulated by The Pensions Regulator.
