Pensions

Pensions

Many people put off thinking about retirement planning – perhaps you’re confident your final salary pension scheme will generate enough income or you think the government will look after you. However, a lot of those people get an unpleasant surprise when they get closer to retirement.

It’s never too early to start thinking about your retirement planning, and to make sure you’ve got a big enough pension pot to provide you with the income you want in retirement.

This means you should think about the following:

1. How much income you’ll need in retirement

To have an adequate lifestyle in retirement, you’ll probably want to:

  • Afford your basic living costs without having to worry each month
  • Keep up any hobbies or sports you participate in
  • Run a car
  • Pay off any debts you have
  • Be able to afford some occasional luxuries, like giving gifts or taking a holiday each year.

For the average person to afford all this, they’d need a pension income of around £17,500 a year. However, around a third of all pension pots in the UK are worth less than £10,000! This means you really can’t afford to be complacent about retirement planning, and it’s never too early to start saving for the income you need.

2. Pension charges

Many people don’t realise the amount of their pension pot they’re losing to fees and charges each year. Researchers recently found that some savers were paying as much as 3% a year in fees – these people could stand to lose as much as two thirds of their money to fees over the course of their working life.

It’s important to find out what your pension scheme is charging, and to take action if you’re being subjected to rip- off charges that will leave you out of pocket by the time you retire.

3. Government support – or lack of it

Many people are unpleasantly surprised to find out how little they will receive from the basic state pension – it’s certainly not enough money for most people to live comfortably in retirement, meaning you’ll need another source of income. Despite this, around 50% of people in the UK have no pension pot at all!

Remember as well that the state pension age is going up all the time – this means you’ll get fewer years of state pension from the government, although it will give you a longer working life during which to save.

4. Is your final salary pension at risk?

If you’ve got a final salary pension, you may think you’ll be fine in retirement. However, many of Britain’s final salary pension schemes are running huge deficits.

Even if your pension fund looks safe, it could be in danger of suffering the biggest risk of all: investment management neglect.

This can be particularly true of paid-up funds from previous employment, which can be not only languishing for lack of active management, but also actually losing money because of annual charges and management fees.

5. New pension rules

The rules around taking your pension changed in April 2015, which means there’s now a wider range of options available to anyone approaching retirement.

The new rules are:

    • You don’t have to buy an annuity (a form of pension income) at retirement
    • If you’re retiring at 55 or over you can take your whole pension as cash, although there are tax implications with this option
    • The 55% ‘death tax’ on pensions has been abolished.

It’s extremely important you understand how these new options could affect you, particularly what the tax implications could be of any decisions you make.

SIPPs

A SIPP is short for a self-invested personal pension, which is an area of pensions in which we specialise at Lifegrid Solutions Ltd. SIPPs are becoming increasingly popular because of their flexibility in the following areas:

  • Investment choice: you can choose to invest in more than 1800 funds and a wide range of other investments such as stocks and shares, commercial property, or many alternative investment products.
  • Retirement choices: there are more ways to take money from your pension.
  • How you pay: you could make regular contributions, single payments or transfers from existing pensions.

To find out more about whether a SIPP could be the right choice for you, contact us today.

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What can I do?

If you want to avoid some of these pension pitfalls and gain some certainty about how you’ll live during retirement, take advantage of a free pension review from Lifegrid Solutions Ltd. We’ll help you find out how much your pension pot is worth, and take action to make the most out of it.

Most important of all, with our guidance you can reach the position where you feel in control of your income in retirement strategy, rather than optimistically leaving it all to unseen fund “managers” whose top priority may not be your own personal wealth.

Click on the button below to get your free pension review today!

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