Over the next decade the number of people set to retire will hit a record high, reaching over 800,000 a year by 2028, according to a June 2022 report by think-tank Resolution Foundation. And yet the Pensions and Lifetime Savings Association (PLSA) report found in July 2018 that around 77% of savers didn’t know how much they’d actually need in retirement.

It begs the question – have you thought about how much you’ll need to maintain your lifestyle when you stop working? And if you already have a pension plan in place, does it go far enough?

The first piece of the puzzle involves assessing what your future expenditure might look like:

• Counting up the day-to-day – a great way to start is by calculating what your day-to-day spending might be if you were to maintain your current lifestyle. Our budget calculator is a simple tool to help you work this out.
• Fulfilling your lifetime goals – retirement is often the best time to pursue your lifelong dreams. Whether it’s travel plans or charitable endeavours, it‘s worth working out how much you’ll need for your goals.
• Passing on your wealth – if you have plans to give away some of your money, such as to help family get onto the property ladder, consider working out how much you want to set aside or leave behind. Our will-writing service could help you with this.

When it comes to pension planning, a great way to make sure you’re on track is by using a pension calculator, such as the one provided by the government backed MoneyHelper website. You can also contact your Premier Manager at any time for a free Financial Health Check to help you review your personal finances. We also have specialist financial planners who could then discuss your options with you in greater detail. 

Here are some other important actions you could consider:

1. Think about what you want to achieve

Try to decide what you want for yourself and those important to you when you scale back or stop work. When would you like to retire? What sort of lifestyle do you want to have? Once you’ve worked that out, our specialists could help you devise a plan to make the most of the various financial tools available to you, not just your pension. This in turn could help you achieve your specific goals in a way that suits you and is tax-efficient.

2. Consolidate your pensions

Bringing all your pensions together may give you a single point of focus from which you could manage your pension. It not only gives you more control over the risk profile of your pension investments, it could mean lower administrative fees too. There could also be reasons to keep your pensions where they are though. For example, some pension schemes will have high exit charges. When in doubt, it’s always worth seeking financial advice. Want to know more? Read our guide to having all your pensions in one place.

3. Consider maximising your contributions

If you have a Defined Contribution scheme, it’s worth considering increasing your contributions – within what you can afford. There are multiple potential benefits to boosting your contributions, including getting more from your employer. If your company matches your contributions, the more you put in, the more they have to put in, and it all comes out of your gross salary so you don’t pay any tax or national insurance on it.

4. Find tax efficiencies

As a higher-rate taxpayer, it’s possible that a £100 pension contribution could only cost you £60. Many people under 75 could benefit from tax relief on pension contributions, even if they’re a non-taxpayer. There are limits, but it could be worth understanding exactly what’s possible for you.

5. Find out about the funding

If you have a Defined Benefit scheme, check what safeguards and protections it has in place to make sure it’ll pay out a secure income for life. If you have other pensions alongside your defined benefit scheme, it’s important to understand your lifetime allowance (how much you could build up in all your pensions over your lifetime while still enjoying the full tax benefits).

6. Understand your options

Pensions offer more flexibility nowadays, so think about how you might want to access it based on your lifestyle. For example, if you plan to work part time you may only need to draw down part of your pension initially. Speak to a pensions specialist about your financial needs and how best to plan for the future.

It’s worth considering maximising your pensions and making the most of the interest and tax benefits that come with it. It’s also worth considering any other income streams you may have, such as tax-free ISAs, existing investments, and rental property.

Ultimately, it’s about piecing together a financial jigsaw to create the picture you have in mind for your retirement.

This article is based on our understanding of current tax law and practice as at August 2022. Tax reliefs referred to are those applying under current legislation which may change. The availability and value of any tax reliefs will depend on your individual circumstances. Advice and product fees may apply. The value of investments can fall as well as rise, and you may not get back the full amount you invest.