Following the introduction of the Pension Freedoms in 2015, it gave savers greater flexibility over their retirement choices, however the reforms have also made retirement choices much more complex.
According to research from Lv=’s consumer survey, it found that more than 60% of 45 to 54-year-olds didn’t know how much they had saved for retirement. If people spent more time planning for retirement, they would be in a better position to understand whether they were saving enough to meet their requirements for retirement.
In the above survey, those asked expected that they would require an average of £1,360 per month to fund their retirement lifestyle, or an annual amount of £16,344. In the current market, this would require someone to have a pension pot of £311,000 if they aimed to retire at 55, or £158,000 if they were looking to retire at 65 (assuming they qualify for the state pension).
However, of those surveyed, between the ages of 45 – 54, their pension pots averaged just £71,342. With almost 40% having less than £50,000, and 13% not having saved anything at all.
Presuming retirement at 55, the average 45 year-old from those surveyed would need to save approximately £24,000 in pension contributions each year over the next decade to fund their retirement lifestyle – a significant financial constraint.
The findings of this report echo the market problems, with individuals not starting to save until it’s too late. Therefore putting substantial financial pressure on themselves leading up to retirement. When it comes to pension planning, it really is the earlier the better, and in fact, the earlier the easier.
Matthew Bromley, Chartered Financial Planner at Cowgill Holloway Wealth Management, looks at five areas to consider if appropriate to your retirement plans:
1. Track down lost pensions
If you’ve moved jobs frequently, you may have lost track of old pensions. The Pension Tracing Service is free and can help you trace a pension that you’ve lost track of, even if you don’t have the contact details of the provider. All you need to know is the name of your previous employer or pension scheme.
2. Consider consolidating
It’s easy to build up a number of different pensions over the course of a lifetime, and by consolidating them into one place you could save money and manage your savings more effectively. This process lets you simplify your pension arrangements and makes it easier to manage your pension savings efficiently from a single pot.
3. Check your other assets
Compile a list of any other savings or investments that you have which could help fund your retirement. This could include equity in property.
4. Review the State Pension
It’s unlikely to be enough to see you through retirement on its own, but it should be taken into consideration when looking at your options. You can check your State Pension age by using the Government’s state pension calculator – www.gov.uk/state-pension-age.
5. Obtain professional financial advice
Regulated professional financial advice is the best way to help you plan and save enough money to last throughout retirement.
This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.