Thinking about pensions sooner rather than later can mean the difference between a comfortable retirement and struggling to make ends meet.
We’ve entered a new age of retirement planning with the introduction of pension freedoms and your retirement is likely to be the most important time in your life you’ll ever plan for – you could be retired for 20 years or more.
Unfortunately, some people put off retirement planning when they are young because they think they’ve got time on their side. However, the earlier you start saving for your future, the bigger the pension pot you’ll end up with when you’re older.
7 pension tips to keep your retirement plans on track
From stopping work altogether to a slow and gradual reduction of commitments, making sure you can sustain the level of income you need as you move away from full-time employment or your business interests is key to a long and happy retirement. Here are a few tips to help you reach your financial goals:
- Consider consolidating your pension pots
While it might be hard to keep track of pensions with job changes, the Government offers a free Pension Tracing Service. Bringing your pension pots together may help you manage them, but take care to understand the benefits associated with the existing contract, along with any potential risks/disadvantages of transferring the funds – and always seek professional financial advice to see if it’s suitable for you.
- Make use of your tax reliefs on pension contributions
When you are able to do this, particularly at higher rates, this can be beneficial. The Government may well revisit pension tax relief post-Brexit to help ‘balance the books’.
- Maximise your workplace pension contributions
If your employer pays a contribution that is linked to your contribution, see if it’s affordable for you to pay the maximum in order to receive your employer’s maximum.
- Invest for the long term
There have been various moments of uncertainty in the markets – think back to the ‘crash’ of 1987 which now looks like a ‘blip’. Keep an open mind, and don’t panic or have knee-jerk reactions. You must remember that when investing in the stock markets, it is inevitable that there will be times of volatility and you can weather the storm.
- Review your State Pension entitlement
Given so many changes, it is worth keeping your finger on the pulse and looking at what you may need to do to top up to the maximum entitlement available.
- Review your expected expenditure in retirement
It’s key that you clearly establish ‘essential’ and ‘discretionary’ spending, so in poor market conditions you can always look to reduce income from pension funds if necessary to cut back on discretionary expenditure that can wait for another day.
- Ensure your income in retirement is set up as tax-efficiently as possible
Making full use of all available tax allowances/exemptions is crucial. Don’t forget to look at how different tax wrappers can work for you.
For assistance with financial planning, including pensions advice and consolidation, please call us on 0115 947 5545.