The three main questions I get asked on a regular basis are the key questions you need to answer before retiring with confidence:
- What age can I retire?
- How big a pension do I need to retire?
- How can I maximise my pension pot?
Here we try and answer these important questions, to help you plan and stop you sleepwalking into retirement.
At what age can I retire?
I find that when people reach age 50, part of the process of reaching this milestone (as well as looking back on their lives and achievements) is to start to look forward to the next chapter, and evaluate their plans and goals.
The earliest age which you can access cash from your pension is 55 and for some it is the beginning of a move into semi-retirement, with most aiming for 60 or 65 for their full retirement, and a transition to the long holidays and well-earned leisure time.
How big a pension do I need to retire?
As you approach the big ‘Five-Oh’, you might be wondering what is a good pension pot value to aim for. This will depend on your circumstances, but according to the Pensions and Lifetime Savings Association, a single pensioner would need a pension of £10,200 a year to live a “minimum level” lifestyle in retirement. This allows for you to cover basic needs and have a little spare income for example for eating out once a month, and a UK holiday once a year.
This basic level should be accessible for many when you consider that the current maximum new State Pension is £9,100 a year.
However, if you would like a “moderate” lifestyle with more financial security and flexibility, such as eating out several times a month, and a two-week European holiday each year, you need to be aiming for an income of £20,200 a year.
For a “comfortable” retirement with more financial freedom and luxuries, the income needs to be in the order of £33,000 a year.
This is where your private pension planning will need to play a part.
Photo by Michael Held on Unsplash
How can I increase my pension pot – 5 tips to help boost your pension:
1. Save more. This is a somewhat obvious answer, but the more you save the more it can grow to produce a larger pot when you retire. HMRC will give you tax relief at your highest rate on contributions up to £40,000 per annum, so pensions are a very tax effective form of saving.
2. Save early. It’s somewhat a cliché but the best time to save for a pension was twenty years ago. The second best time to save is now. The longer you have, the harder your money can work, so it’s never too early to start saving, and if you have left it late then see 1.
3. Hunt down your old pensions. The Association of British Insurers estimates there are £19.4 billion of ‘lost’ pensions in the UK. Most people have several jobs, and many move house several times throughout their working lives. In addition, people may have contracted out of SERPS (the State Earnings Related Pension Scheme) in the 1980s and 1990s diverting this money to private pensions, so it is very easy to see how people lose a few pensions along the way. Unfortunately tracking down lost pensions is not always easy so many people seek help from a professional to do the detective work for them.
4. Make sure your pension is fit for purpose. As people go through their working lives they accumulate a few workplace pensions or private pensions over the years. Often, when they receive their annual statements, they just file the paperwork away and don’t review where their pension is invested or how it has performed. There is therefore a good chance that these old pensions aren’t suitably invested and could be losing out on growth as a result.
5. Get professional advice. If you haven’t reviewed your pensions recently and want to check you have got a good pension pot, and are on track for the retirement you want, it’s worth taking professional pension advice.