Thinking about your retirement may be at the bottom of your agenda, but the sooner you start planning for your finances in the future, the more prepared you’ll feel. Luckily, retirement planning doesn’t have to be the daunting task you might think.
Oakworth Financial Planning has put together our top tip pension tips that you can start putting into practice now, and you’ll be all the better for it.
1. Decide When to Retire to Understand How Much You Need to Save
The age you are now and the age you want to retire are key elements of your planning. For example, if you’re 20, and you want to retire at 65, you can afford to save less and still achieve the same target as someone who starts saving when they are older.
This is why we recommend starting saving early, especially if you want to retire earlier than state pension age. Saving now could reduce the number of years you will need to finance once you eventually stop working.
2. ‘Tidy Up’ Your Pensions
If you know you have a few pension pots, make sure you have a clear idea of which ones you have. It can be easy to lose track of old pensions from a previous job or moving property.
There could be benefits of bringing them together and consolidating them in one pot. First, because it’s easier to keep an eye on what they are worth and second, how they are invested, so you can adjust accordingly if required.
However, if you aren’t too sure about doing this, feel free to get in touch with us to seek professional pension advice.
3. Make the Most of Your Workplace Pension Scheme
It makes sense to join your company’s pension scheme as all employers have to pay into their employee’s pensions through auto-enrolment.
We recommend finding out how much your employer will pay into your pension and if they increase the amount if you decide to pay more in. If they do, this is a huge incentive for you to invest more.
When first joining a job, you might only be able to invest a smaller amount initially, but try to increase this as you get older – especially if you receive a pay rise.
4. Update Your Beneficiary Nomination
Now it’s much easier to pass on your pensions to a loved one, so it’s a good idea to talk to your family about your plans, as you may want to work through the decision together.
All you need to do is request a form from your pension provider and fill in the information.
They then can look at your Beneficiary Nomination to see who you have chosen to pay your savings to – this is different to your will.
5. Pensions and ISAs
For most people, the best way to approach long-term saving investments is a combination of pensions and ISAs.
This is because pensions provide initial tax relief which will give your savings an immediate uplift, and ISAs are still tax-efficient but can be accessed whenever you like.
6. Check How Your Pension Savings are Invested
Once you have your investment up and running, it’s a good idea to keep an eye on how it performs over time, as this will help you check if you’re on track for reaching your target retirement fund.
If you have more than one investment, it’s wise to update these if required, for example, if you’re no longer happy with them, or they are performing badly.
However, always remember that pensions and ISAs that are invested in the stock market can dip over time. If a market or sector that your investments are in are down in general, don’t panic – this is all part of investing.
Oakworth Financial Planning can provide you with advice on this if your investments are dipping.
7. Beware of Scams
When you are looking through the various markets and sectors for your investments, be aware of anything that sounds too good to be true, it could be a scam. If you aren’t sure, it’s better to get in touch with a financial advisor who can provide advice.
8. Other Savings
When you’re approaching retirement, take a look through any ISAs or other savings accounts you may have. We recommend reviewing these and deciding whether you can move them into your pension in order to make the most of the tax relief.
It may not suit everyone, but something worth considering.
9. Accessing your Savings in Retirement
When you retire, you’ll have a choice of accessing cash, keeping your savings invested, drawing a flexible income, buying a fixed income or a combination of these.
It’s a good idea to think about what you’d like to do when the time comes. You’ll also need to give some thought to how you are going to generate income during retirement, as you could retire at the age of 65 and then live for another 30 years. This means if you have too much investment risk, or make high-level withdrawals, you could run out of money.
10. Seek Independent Financial Advice
Retirement planning can be complex, so it’s completely normal to seek independent financial advice, as getting it wrong could have an impact on your future.
At Oakworth Financial Planning, we can make sure you are on track to achieve your retirement goals and ease any worries or concerns you may have.