of over 50s
Tips and tools for retirement planning
Did you know that...
37% of over 50 leave retirement finance planning late, or opt not to plan at all?
For many people, planning for retirement is a big financial and emotional step. It is important to think about retirement goals and how much time you have to make them, as well as how much money you’ll need to save in order to fund your future.
Retirement planning tips
State pension age
The state pension age is changing. This could affect how early you are able to claim your state pension and, in some cases, will mean that you may need to work for longer.
With this in mind, financial planning for retirement is essential to get a measure of your income, expenditure, state pension and personal pension funds, as well as considering any pension schemes provided by your current or previous employer(s).
Your employers pension scheme and automatic pension enrolment
Every UK employer that has more than one employee is responsible for automatically enrolling all its eligible employees into a workplace pension. This can be a great opportunity to boost your retirement savings, benefitting from your employer and the Government also putting in money.
Where automatic enrolment into a pension is available:
your employer is required by law to contribute at least 3% of your earnings.
The minimum total contribution you and your employer will make is 8% (as of April 2019).
Your personal pension
Your personal pension pot is currently accessible when you reach the age of 55. However, the Government has announced that the minimum age at which individuals can access their personal pensions will increase from 55 to 57 in 2028.
You’ll receive an annual pension statement from your personal pension provider. It’s essential to check this on a regular basis, as your pension statement is a useful indicator of the value of your pension pot, your specific age of retirement and what you might expect to receive at that age. You should review your investment choices regularly and make sure that they continue to match your retirement aims.
Accessing pension savings at the minimum age may not be the best option. Most people will live longer than they expect and their pension savings need to cover their requirements for the rest of their life. You may prefer to wait until a later date, which also gives your pot a chance to grow. You can check your estimated life expectancy using the Office for National Statistics interactive tool.
Define your retirement
According to statistics produced by the Money and Pensions Service:
of retirees said they left financial planning to the last two years of their career or didn’t prepare at all.
With this in mind, it is important to consider your financial expenses during retirement and your personal goals to be achieved – For example:
You can also use the Retirement Living Standards information produced by the Pensions and Lifetime Savings Association to help you to picture what kind of lifestyle you could have in retirement.
Evaluate your health
When you are reviewing your pension and retirement options, it is important to consider your current health and lifestyle, as well as any age-related illnesses. This may have an impact on your decision about when to retire and the necessities that you will need to put in place to maintain your health during your retirement years. It is therefore important to:
Find out what your state pension entitlement is expected to be and how can you maximise the benefits.
Decide when to collect your state pension and any other benefits – Consider at what age you would like to retire.
Consider whether you plan to carry on working. Use the Age UK Benefits Calculator to assess what you are entitled to.
Retirement planning tools
Retirement planning calculator
You can use this calculator to review your assets, savings and other sources of income that will fund your retirement (for example, property). Use the Phoenix Life pensions calculator to estimate the future value of your personal pension savings.
Retirement budget calculator
You can use our retirement budget calculator to create your ideal retirement budget. Our handy budget planner will help you work out how much money you may need each year to give you the kind of retirement you have always looked forward to. Be sure to include all income that will carry on during retirement and account for any debts that you have. Make sure that you prepare for the unexpected, such as ill-health and changes to your income.
Pension tax calculator
When you access your pension savings there will usually be tax implications. These will vary depending on which retirement option(s) you choose. You can learn more about these here. If you are thinking of taking all your pension savings as a cash lump sum, you can use the Phoenix Life Tax Calculator to help you understand what tax you may pay if you choose this option to access your Phoenix Life Pension Policy.
Flexibly accessing your pension
Often referred to as ‘pension drawdown’ you can take money from your pension flexibly as an income that you can start, stop or change to suit your circumstances. Any money that you don't take now, you can leave invested so it has the potential to grow. Money in a pension plan is usually invested so its value can fall as well as rise and you could get back less than was paid in.
Guaranteed income
An annuity is usually designed to provide a guaranteed income for life, but it can be set up to provide an income for a specified number of years. There are options regarding the frequency that income from an annuity can be paid, for example; monthly, quarterly or annually. It is also possible to arrange for the payments to be for either a fixed amount or increasing over time, usually year by year. The annuity can also continue to be paid to a spouse, civil partner or dependant if you die before they do.
Planning for retirement
It is never too late to start planning for retirement.
From age 50, you can use Pension Wise, a Government service from MoneyHelper that offers free, impartial guidance.
We also recommend that you get in touch with an authorised independent financial adviser to help you plan for your retirement. They will review your circumstances and provide recommendations tailored to your specific needs. If you don’t have an adviser we can help you find one or you can find one in your local area using Unbiased.
Making decisions about your finances can feel daunting, but preparation will allow you to confidently step into an enjoyable retirement.
Source: Money and Pensions Service, accessed 6th January 2021.