How much time do you spend planning for retirement?
The 2015 pension freedoms gave us greater flexibility over our retirement options, but the reforms have also made retirement choices much more complex. This means we need to start thinking about our retirement earlier. However, half (50%) of respondents aged 45–54 to a LV= consumer survey didn’t think about retirement at all last year.
Given the lack of time people spend thinking about retirement, it’s perhaps unsurprising that six in ten (62%) 45 to 54-year-olds don’t know how much they have saved for retirement, and only
around one in ten (12%) say they fully understand the 2015 pension reforms. If people spent more time planning for retirement, this could help them better identify whether they are saving enough. According to the survey, people expect to need £1,360 a month in order to live comfortably in retirement. In order to do this, someone retiring at 55 would need to have around £311,000 saved, or £158,000 if they retire at 65 – assuming they qualify for the full State Pension. However, the average pension savings of those surveyed aged 45–54 years old is £71,342, with four in ten (39%) having less than £50,000, and one in seven (13%) not having anything at all. To achieve the amount they want and retire at 55, the average 45-year-old would need to save around £24,000 in pension contributions each year for the next decade. Anyone approaching retirement should check their pension pots annually and seek professional financial advice to help them make a plan.
Five areas to consider if appropriate to your retirement plan
- 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.
- 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 make it easier to manage your savings. This process lets you simplify your pension arrangements and makes it easier to manage your pension savings effectively and efficiently from a single pot.
- 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.
- 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.
- Obtain professional financial advice – Regulated professional financial advice is the best way to help you plan and save enough money to last throughout retirement.