Sometimes in life, size matters. And when it comes to your retirement, how much you’re going to need in your pension pot is completely personal to you. It boils down to what you plan to do when you retire and how much these plans could cost you. The age you are thinking of retiring plays a part too. In this blog we reveal five ways to maximise your retirement savings. And you can discover how your planned retirement age compares with the nation plus the three key factors that could affect when you retire.
Portafina’s top 5 tips for maximising your retirement savings:
- Start saving now: there’s no time like the present when it comes to saving for your future. The sooner you start saving the more time your investments have to grow, meaning there could be more money when you need it.
- Topping up your pension by a little bit extra every month or when you can, could make a big difference to your pot size. Don’t forget, your pension savings receive tax-relief and benefit from compound interest.
- Don’t opt out of your work place pension scheme. It could cost you thousands. While final salary pensions are less and less common, auto-enrolment is a silver-lining for many employees. From April 2019, total contributions will be 8% of your salary, including 3% from your employer.
- Check your pension remains tailored to you as your life changes. Whatever your pot size, high charges and poor performance could be eating away at your hard-earned money. Checking your pension with a regulated financial adviser means your money keeps working hard for you. And regularly reviewing your pension will mean it remains tailored to you every step of the way.
- Stick it out a bit longer: deciding to work for a few extra years could make a big difference to the size of your pot when you need it. The longer your pension is invested the more it benefits from compound interest. And your contributions continue to receive tax relief during those extra years too.
How does your planned retirement age compare?
Trying to decide what your retirement age might be can feel like plucking a number out of thin air. You know your retirement is going to happen but it’s difficult to know exactly when. So, how does your planned retirement age compare with the nation?
The top 5 planned retirement age’s for men and women are:
|Age||% Both sexes||Age||% Women||Age||% Men|
We can also reveal that:
- The majority (84%) of both sexes said the earliest they plan to retire is 65 and over compared to only 4% who think they will retire in their 50’s.
- 1 in 5 women plan to retire under the age of 65.
- Three times the amount of men and women plan to retire at 70 than at 55.
- More than double the amount of men and women plan to retire at 67 than 65 (42.8% vs 19.3%).
- 7% of men and women think they will retire over the age of 70.
Three factors that could affect when you retire
People are working longer: in fact, the number of men and women in employment2 between the age of 60 and 64 has risen considerably over the last ten years. There are now nearly double the number of women employed than there were in 1998 and 14.3% more men.
Over a quarter of men aged 65-69 are still in employment compared to 15% ten years ago.
The State Pension age is rising: for the first time in over a century since its introduction, the State Pension age has equalised at 65 for men and women. The State Pension age for women has been gradually rising since 2010 when it was 60. Despite a State Pension age of 65, our data shows that half of women (49.6%)1 plan to retire at 67.
The full amount you could receive from the State Pension is £164.35 a week (Feb ’19). When planning for your future you should consider if this will be enough for you to live comfortably on and do the things that you want to do.
There’s greater pension flexibility: introduced in 2015, the pension freedoms mean more options for over 55’s. At 55, and with the right type of pension, you have the option to take an income including taking lump sums from your pension, or you could take it in one go.
Between April 2015 when the pension freedoms were introduced, and September 2017, over 1 million personal pensions were accessed before the age of 653. And half of those that were accessed for the first time were fully withdrawn. Greater pension flexibility also means you have the option to semi-retire. If you decide to work part-time you could use your pension fund to supplement your income while you transition into full retirement.
Taking money early from your pension might not be right for you, as it could leave you with less to live on than you need; it shouldn’t be seen as an easy way to raise money. That’s why it makes sense to get financial advice before making any big decisions. Jamie Smith-Thompson, MD at Portafina says,
“Deciding when to retire is a completely personal decision. There’s clearly a lot to consider and it can feel overwhelming to think about what life after work will look like. The great news is you can take a flexible approach to your retirement.
“It’s not necessarily as clear cut as it was for previous generations. Direct benefit schemes are thin on the ground which means many of us don’t have a guaranteed pension pot to turn to at retirement. That’s why it’s important to think carefully about your options and get regulated advice. It’s clear to see how compulsory workplace pension schemes via auto-enrolment could make a massive difference to people’s savings plans.”
1Data and statistics provided by Portafina. Planned retirement age of 3,139 clients. 1st Jan to 21st Nov 2018.
2As a proportion of the population. Gov.uk
3FCA Retirement Outcomes Review: June 2018.