As the state pension age rises, life expectancy increases, and final salary pension schemes become a thing of the past, it looks likely that more workers will remain in employment for longer in order to be able to build up sufficient funds for their retirement years.
According to analysis by Aviva1, the number of people retiring before they reach age 65 is decreasing rapidly. The insurer calculates that if the present rate of change continues, by 2035 almost no one will be able to retire early. Figures from the Office for National Statistics show a record 10.1 million over-50s remain in work, with 1.2m of these workers aged over 65. Ten years ago, less than 700,000 over- 65s were in work. In 1998 the figure was 434,000.
How to plan for retirement
Increased life expectancy means that people retiring at 65 today can reasonably expect to live on into their 80s if not longer, and some can expect to live to 100. However, when it comes to planning for retirement, people can underestimate the odds of reaching a great age and may not be adequately prepared financially for the years ahead.
That’s why it makes good sense at all stages of your working life to keep an eye on your pension arrangements, especially if you intend to retire earlier rather than later. You need to think about the following key questions:
- When do I want to retire?
- How much will I need in income and savings to fund my lifestyle in retirement?
- Are my plans on track? Am I currently saving enough?
Although it has recently been increased, the state pension is still only a basic safety net for most people, and not enough on its own to guarantee a comfortable retirement.
Personal pensions offer generous tax breaks to encourage us all to provide adequately for retirement. If you are a basic-rate taxpayer making a pension contribution, every 100 you pay in will in effect only cost you 80 once income tax relief has been applied. If you are a higher-rate taxpayer, every 100 contributed within the HMRC annual allowance would cost just 60.
As part of the government’s drive to ensure we all make adequate provision for retirement, employers are now legally obliged, subject to age and earnings thresholds, to automatically enrol their employees into a qualifying pension scheme, where employees and employers make monthly contributions.
Taking advice can help you meet your goals
The need for professional advice tailored to your individual circumstances has never been more important. If you’re concerned about your pension arrangements, we’re happy to review your plans and help you keep on track for a financially-comfortable retirement.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The information within this article is for information purposes only and does not constitute advice.