Retirement Planning

Less than a third of adults in the UK are contributing to a pension

Even now state pension leaves pensioners having to choose between heating and eating AND those in their 20s now are likely to be working until their 70th birthday before they are allowed to claim it

BUT starting to plan NOW no matter what age you are WILL help you be able to retire when you want to retire AND live comfortably 

 

Need to know

  • You will automatically qualify for the State Pension once you reach the specified age if you have been contributing to National Insurance (see box below)
  • If you want to live on more than the State Pension (£115.95 a week) the sooner you can start saving the better
  • Any money you pay into a pension will not be taxed, if you earn £100 you would pay £20 of that in tax making your pay £80, if you put that £100 into a pension you’d keep all of it
  • BUT you need to work your pension into your budget and make sure you are not saving more than you can afford. You may also want to save for a mortgage and the financial security owning your own home can bring
  • General advice is take advantage of the free money out there (tax relief and employer contributions). Save a small amount when you’re young, so you can save for other things, and then gradually increase your payments as you grow older. You will be able to get more personal advice by talking to Pension Advisory Service
  • ***NEW*** from April 2015 those over 55 will be able to withdraw their entire pension without facing heavy tax penalties. The first 25% of the pension pot will be tax free, an extra £10,600 (your personal allowance) will be tax free depending on whether you're earning, the rest will be taxed at either 20%, 40% or 45% depending on the amount
  • TIP if you are not earning and decide to withdraw your pension pot do it in stages. Keep your withdrawals under the basic rate tax band (£31,865 in 2014/15) to only pay 20% tax. If you are unusre talk to the Pension Advisory Service   
  • Below are they ways you can save for your retirement
 

Ways to save for your retirement

  • Workplace Pension: The Government is currently rolling Workplace Pensions out around the country. Part of your wage (4% as of 2018) will be saved in a pension, your employer will also contribute (3% as of 2018) as will the government (1% as of 2018). You will be auto-enrolled in this scheme when your company becomes eligible, but will able to opt out if you want to save for your retirement another way. FIND OUT MORE
  • Company/Occupational Pension: A scheme set up by the employer. Both the employer and the employee normally pay in to this and it becomes available when the worker retires. 
  • Personal Pension (Defined Contribution Pension Scheme): A pension you hold with a provider and pay into. They invest it and send you annual statements showing how much your fund is worth. This may also be available through your workplace with employer contributions. FIND OUT MORE
  • Stakeholder Pension: Another, more flexible type of Personal Pension with low charges as they are capped by the Government 
  • Sipps: Another type of Personal Pension where you have more control over where your money is invested. FIND OUT MORE
  • Final Salary Pension (Defined Benefit Pension Scheme): Where your pension is defined by how many years you’ve worked for your employer and what your final salary was
  • Annuity: You can use your Pension pot to buy an Annuity. An Annuity pays a guaranteed income for a fixed period, normally for life
 

State Pension

  • A state pension is available to everyone who has paid National Insurance for 30 years or more, or has been claiming benefits for unemployment or sickness
  • You can top this up with voluntary payments to ensure you qualify
  • It is currently £115.95 per week but rises every year by at least 2.5%
  • Women currently need to be 62 to claim, men 65, the ages will steadily rise, those born after 6th April 1978 will need to be 68 before they can claim
  • You can work out how much you are currently entitled to, and how many years you have left until you can claim using the State Pension calculator
 

The inside track

  • With any savings and investments spreading your money around is the safest option, other tax free investment includes Cash ISAs and Stocks and Shares ISAs. You can also look at Peer to Peer Lending which can give a VERY high return
  • If you have moved jobs you may have left a pension behind, any money in your pension pot is yours forever. The government’s pension tracing service has the details of over 200,000 pensions. You’ll need your past employment details but the form takes just 5 minutes to complete. Check out this guide to Lost Money to make sure you haven’t misplaced any more cash
  • Pensioner bonds. These savings accounts for the over 65s launched in January 2015 and offer up to 4% on savings
 
 

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