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Pension planning – are your finances in a position for you to retire?

Many people’s financial objectives are to fund a comfortable retirement, yet many savers spend more time planning their holiday than their own retirement – whilst it may be too complicated to think about, it’s something that should be considered sooner, rather than later.

Matthew Bromley, Chartered Financial Planner at Cowgill Holloway Wealth Management explains the key things to consider when calculating whether your finances are in the position they need to be to fund your retirement objectives.

Whilst there is no doubt that the savings and investments process is complicated, it’s important to make sure that you have the people in place to help you plan for your retirement – a professional financial advisor is essential to help set your plan in motion. It’s essential to continue reviewing your plan at least annually, to ensure it’s still on track for the retirement you want.
Key considerations for most people

Everybody’s circumstances are different, but the key considerations for most people when they think about retiring will come down to factors such as whether they’re renting, paying a mortgage, have any debt, plan to keep working, and how much money they have saved in pensions and other investments.

It’s also important to bear in mind that your life changes when you retire – and so does the way you spend your money. The increases in the cost of living with inflation are another important consideration. While the State Pension increases with inflation (with the ‘triple lock’, increases can exceed inflation), income from your pension might not, depending on how you decide to take your money.
Start saving for your pension early

If you start saving for your pension early in your working life, it may be difficult to predict what your needs will be when you retire. Ideally, you should aim to put away as much as you can afford, but don’t worry if it’s not as much as you’d like to start with. It can be better to save small amounts that have a long time to grow in value. As your income improves, you may be able to increase how much you put away for your pension.

If you’ve started to save later in your working life, you may have a better idea of what your circumstances are likely to be, which can make it easier to work out what level of income you’ll need for your retirement. However, you’ll have less time to save it up, and the amount of money you’ll need to save may be higher.
Achieving financial freedom
Saving for retirement is essential if you want the financial freedom to enjoy your later years. Things to consider include:
·          Deciding how much money you want each year in retirement
·          Calculating how big your pension pot needs to be to give you that income
·          Working out how much you should be saving today in order to build that kind of pension pot value

Remember: you’re perhaps unlikely to have a mortgage and other big expenses at this stage in your life, so you may need a lot less than you do when you’re working. The ratio tends to go up for those on lower salaries, as you’d expect.
Know your number

Next, you want to work out how big your pension pot needs to be in order to achieve the retirement income you want – don’t be scared by the number looking “too large” or “too exaggerated” – a rule of thumb is to take the annual retirement income you’d like – let’s say it’s around £50,000 – and then multiply that by 20. So in this example, to achieve a retirement income of £50,000, you’d need to build up a pension pot worth in the region of £1,000,000.
Your annual allowance

You can receive income tax relief on your own contributions to pension plans. You can contribute up to the greater of £3,600 and 100% of your salary. The standard annual allowance is currently set at £40,000 for the current 2016/17 tax year (higher earners or those who have flexibly accessed their pensions may have a lower figure). If the contributions paid on your behalf (including any employer and personal contributions) exceeds the standard annual allowance, then you may have to pay a tax charge based on the highest rate of Income Tax that you pay – it’s important to ensure that you are fully maximising your annual allowances.
Need to boost your future retirement income?

No matter where you are in the financial planning process, there are several things you can do to boost your future retirement income. Everyone’s retirement needs are different, and planning for your retirement is just like any other kind of budgeting you have to do: it requires calculating some numbers, implementing a plan and continually reviewing it until you reach your goal.

If you’ve not already started to plan for your retirement, now is the time – our team of independent financial advisors can advise you on what you need to put in place now, in order to meet your retirement goals.

For more information about Pension planning contact Matthew Bromley – Chartered Financial PLanner in Bolton on 01204 414243 or Matthew.Bromley@Cowgills.co.uk


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.


The information was correct at time of publishing but may now be out of date.

Wealth Management
Posted by Cowgills
7th September, 2016
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