Retirement planning - understanding the importance of a pension

So many of us spend our life dreaming about when we will no longer have to work. Unfortunately, an equally large number of us don’t put in the same amount of time in saving and preparing for said time.
 
To make sure you’ll be able to maintain the lifestyle to which you have become accustomed, you need to provide yourself with an on-going regular income. A well-prepared pension plan will go some way to providing you with this.

A pension plan requires action as soon as possible, so start now - and if you have already started, take the opportunity to have a closer look at your existing arrangements to make sure you are on track.

Data show that someone making a £100 a month contribution to their pension starting at the age of 40 would accumulate a pot of just over £24,000 by the age of 55, assuming the pot grows by 5% per year. In comparison, if you did the same from age 25, you would save over £68,500. In this case, an extra 15 years of saving can nearly triple the pension pot!¹

How much am I going to need for my retirement?
This of course, depends on your aspirations. What will be the costs of day-to-day living be? What will you want to do during your retirement? Do you have travel plans or a bucket list you want to work through?

Once you come up with a figure, add in an amount as a buffer against the unforeseen and unexpected.

I already have a pension so I'll be fine, won't I?
It’s essential that you regularly review the status of your personal plan, to check it’s on track to give you the pension you want.

If you are in an employer's scheme you will be able to obtain a statement from either your employer or the pension provider outlining the scheme benefits. Alternatively, contact us and we can analyse your current provisions and make any recommendations with the aim of achieving your goals.

For a personal pension, the level of contributions you have been making to your scheme, investment performance and charges will determine the size of your pension, however, as the years go by, your fund should increase and could eventually get to a size where the investment returns come into play. The larger your fund, the more advice you may need on managing the fund for optimum performance, because every percentage point increase or decrease could potentially represent thousands of pounds.

What type of Pension should I have?
There is no simple answer as this depends on your employment status, e.g., self-employed, employed or director, and the benefits that are available through your employer's scheme, if there is one.

Understand how your pension is invested
We’ve all seen the calls to be more pension savvy but it really is important to have a basic understanding of how your pension is invested.

The higher the risk of an investment generally means it will have a higher potential return. However, high risk investments also increase the potential to lose some of your money. On the flip side, low risk investments may mean you’re less likely to lose money, but it also means the growth potential is lower.

Default funds are often deemed as lower risk but depending upon your circumstances, such as time until retirement and your attitude toward risk you may research other fund options as even a small change could significantly increase the size of your pension pot.

It is important to remember that the value of investments can go down as well as up.

Benefit from advice
A financial adviser will help you make the best possible decisions for your personal circumstances and retirement plans. An adviser worth their salt will cut through all the complexities associated with pension planning and use the benefit of experience to give you the best possible chance of achieving your long-term financial goals.

By Daren Wallbank

THE VALUE OF PENSIONS AND THE INCOME THEY PRODUCE CAN FALL AS WELL AS RISE. YOU MAY GET BACK LESS THAN YOU INVESTED.
TAX TREATMENT VARIES ACCORDING TO INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE.

¹https://www.quilter.com/news-and-views/all-articles/five-ways-to-make-the-most-of-your-retirement/