Retiring is something that most adults in the UK look forward to, for good reason, you’ve spent the majority of your life working hard to save up the funds to be comfortable in later life with no stress or worry about money. It is never too early to be thinking about your pension and to educate yourself on the best ways to save and prepare for retirement.
September 15th, 2019 is Pension Awareness Day and the aim is to promote the importance of pensions and saving for the future and alert the nation that we’re not saving enough for retirement. There is no better day to educate yourself on ways to save and prepare for when the time comes to retire.
Most of us would agree that pensions might not be the most entertaining topic to talk about, so Pension Awareness Day aims to encourage the use of more simple language to make it easier.
Everyone has a different idea of how they plan to spend their retirement, some may want to settle down in the countryside while others might consider moving abroad to travel with their pension fund. Whatever it is you decide is the right direction for you in later life, it is essential to ensure that you are covered financially for any situation.
Statistics from 2018 suggest that around 35% of the adult population in the UK don’t have a pension or are unaware that they have one – this is approximately 18.4 million brits. These statistics suggest that drastic action needs to be taken to educate UK adults on pensions.
People living longer, coupled with the uncertainty over the changes to the state pension age, means it is clear there is still a long way to go in equipping people with the tools and information they need to help them save more for retirement.
In November 2018, the State Pension age was 65 for men and women. However, this is gradually increasing and now depends on when you were born. It has been suggested that state pension age will continue to increase and will reach 67 or even higher by 2028 according to Age UK. You can now expect to work up to seven years longer before you can receive your full state pension.
Unfortunately, the state pension is unlikely to be enough to provide the income you need to maintain a comfortable standard of living once you’ve stopped working. So it’s a good idea to build up your own retirement savings pot throughout your working life.
New government laws require employers to offer a pension scheme that’s subject to minimum regulatory and governance requirements. This is known as automatic enrolment. They must also contribute a set proportion of your wage to your pension pot. You will be automatically enrolled into a pension scheme if:
– you’re aged over 22
– you’re under State Pension age
– you earn more than £10,000 a year
– you’re not already in a workplace pension scheme
– you work in the UK
From 6 April, the minimum your employer has to contribute increased to 3% of your salary, up from 2% previously. At the same time, the minimum total auto-enrolment contribution rose to 8%, which is the total you and your employer together must put in.
What exactly is “enough”? Have you thought about how much you will need in retirement? You will need to consider your monthly bills and expenses, and whether you will be paying rent or a mortgage or living in a home you own outright.
Factor in your state pension and any other income you may have, and you can see the size of the gap your pension needs to fill.
It has also been found that around 55% of adults believe approximately £100,000 is enough to retire comfortably. However, this is far below the recommended amount by Royal London for a comfortable retirement which stands at around £260,000–£445,000, depending on accommodation costs.
Pension awareness day aims to bridge the gap in knowledge of pensions and prepare everyone, regardless of age, for retirement.
You don’t have to take out a pension but if you still want to maintain a comfortable lifestyle when you stop working you’ll need to save some of your own money.
A pension is a long-term investment that has generous tax benefits and simply aims to provide you with an income for later life or when you retire.
When you do decide to stop work, you’ll no longer have your salary and will still have bills to pay – this is why having a pension is extremely important. If you retire and don’t have enough income to cover living costs (i.e. rent/mortgage, food, bills, etc) it could leave you in a difficult situation that will be hard to get out of.
Living longer into retirement, due to increased life expectancy, presents us with an important question – will we have enough money to enjoy the lifestyle we desire and to last us, once we have stopped work?
Adults in the UK are saving less on average for their pension than they should, this is a problem because we are living longer than expected and therefore will have less money available to live off when you retire.
Focusing on retirement now is the way forward, you can never plan too far in advance when it comes to your pension and financial situation.
Here are some tips on saving for retirement and things to be aware of with your pension and ways to be prepared for your financial future.
1. Start by putting in is as much as possible, as early as possible.
2. Don’t delay. If you delay saving into a pension, you’ll then need to contribute a higher percentage of your pay to achieve a comfortable retirement. The sooner you contribute, the longer your money has to grow. The compounding effect of investment returns can make a massive difference over the long term.
3. Track your progress. Running a retirement calculation at least once per year is advisable to see if you are on track to meet your goals. Keep in mind that your plan is dynamic, not static. Review your progress at least once a year. Also think about the impact that life events such as a marriage or divorce, promotion or redundancy, birth of a child and funding education will have on your plan. If necessary, make changes to your plan as your situation changes and keep open the lines of communication with your spouse, partner, friends, and family.
4. Get an estimate of your state pension and get in touch with all your pension providers and let them know you’re planning for retirement – they’ll usually send you important information about your pension.
5. Don’t panic! You still have time! Sit down with a cup of tea or coffee and start to work out how much you’ll need for retirement and go from there.
If you need any advice about pension planning there are numerous resources available to you –
Money Advice Service:
0300 500 5000
Pension Advisory Service:
0800 011 3797