In the lead up to Pension Awareness Day this Friday 15 September, our Independent Financial Advisers will be sharing their views and tips for achieving a comfortable retirement.
How much time do you spend planning for retirement?
Given the lack of time people spend planning about retirement, it’s perhaps unsurprising that six in ten (62%) 45 to 54 year-olds don’t know how much they have saved for retirement, and only around one in ten (12%) say they fully understand the 2015 pension reforms. The pension freedoms reforms gave us greater flexibility over our retirement options, but the reforms have also made retirement choices much more complex.
We are all living longer, the State Pension Age is increasing and pension’s legislation is ever-changing. Understandably, we want an active, comfortable retirement but often don’t know where to start the savings process. If confusion and a lack of understanding around your retirement needs have led you to put off planning and saving anything, you’re not alone. In 2017, LV= conducted online interviews; of the 2,404 adults interviewed:
50% of respondents aged 45 to 54 didn’t think about retirement at all last year.
Planning will help you think about the changes you could make and enable you to take steps towards securing a better future.
Cut the caffeine, boost your retirement
After surveying more than 2,000 pensioners about their spending in retirement earlier this year, Which? found that, on average, retirement couples needed £18,000 a year to cover household essentials such as food, utilities, transfer and housing costs, rising to £26,000 allowing for extras, such as European holidays and leisure activities and near £39,000 for the more luxurious lifestyle.
If we take the middle figure of £26,000, that’s a reasonable £13,000 per person. If you’re entitled to the full state pension of £8,092 then you need to supplement it with around £5,000 per year.
For those of us starting a pension in our 20s and 30s (the earlier the better) then the costs of a comfortable retirement may not be that far away. Consider the price of a cup of coffee, around £3, depending on your favourite java house. Investing the same amount into your pension each day could be a small but significant step in reaching your target.
Three steps to help you plan:
Step 1 – Target
Know what you need – set yourself a goal
Step 2 – Plan
Know what you have to work with
Step 3 – Action
Stick to your plan and budget effectively
- Are you paying in the right amount?
- Are you invested in the right kind of fund?
- When can you realistically retire?
Don’t put off planning for retirement. Small steps taken early can make a huge difference. Saving regular into your pension or drip-feeding amount of money into the right investment can generate an income that will make your goals achievable.